N-30D TABLE OF CONTENTS
SSgA Fund Name N-30D Page
- -------------- ----------
SSgA-SM-Life Solutions-SM- Funds....................
Income and Growth Fund........................
Balanced Fund.................................
Growth Fund...................................
Money Market Fund...................................
Matrix Equity Fund..................................
Prime Money Market Fund.............................
Small Cap Fund......................................
US Treasury Money Market Fund.......................
Yield Plus Fund.....................................
Bond Market Fund....................................
S&P 500 Index Fund..................................
Active International Fund...........................
Tax Free Money Market Fund..........................
US Government Money Market Fund.....................
Growth and Income Fund..............................
Intermediate Fund...................................
Emerging Markets Fund...............................
Tuckerman Active REIT Fund..........................
International Growth Opportunities..................
High Yield Bond.....................................
Special Equity......................................
Aggressive Equity Fund..............................
IAM Shares Fund.....................................
<PAGE>
SSgA(R) Life Solutions(sm) Funds
Income and Growth Fund
Balanced Fund
Growth Fund
Annual Report
August 31, 1999
Table of Contents
Page
Chariman's Letter............................................. 4
Portfolio Management Discussion and Analysis.................. 6
Report of Independent Accountants............................. 11
Income and Growth Fund Financial Statements.................. 12
Financial Highlights........................................ 16
Balanced Fund Financial Statements........................... 18
Financial Highlights........................................ 22
Growth Fund Financial Statements............................. 24
Financial Highlights........................................ 28
Notes to Financial Statements................................. 29
Tax Information............................................... 37
Fund Management and Service Providers......................... 38
"SSgA(R)" is a registered trademark and "Life Solutions(sm)" is a registered
service mark of State Street Corporation and is licensed for use by the SSgA
Funds.
This report is prepared from the books and records of the Funds and it is
submitted for the general information of shareholders. This information is for
distribution to prospective investors only when preceded or accompanied by a
SSgA Funds Prospectus containing more complete information concerning the
investment objectives and operations of the Funds, charges and expenses. The
Prospectus should be read carefully before an investment is made.
Performance is historical and assumes reinvestment of all dividends and capital
gains. Investment return and principal value will fluctuate so that an
investor's shares, when redeemed, may be worth more or less than when purchased.
Past performance is not indicative of future results. International markets
entail different risks than those typically associated with domestic markets,
including currency fluctuations, political and economic instability, accounting
changes and foreign taxation. Securities may be less liquid and more volatile.
Please see the Prospectus for further details. Russell Fund Distributors, Inc.,
is the distributor of the SSgA Funds.
<PAGE>
SSgA Intermediate Funds
- --------------------------------------------------------------------------------
Letter From the Chairman of State Street Global Advisors
- --------------------------------------------------------------------------------
Dear Shareholders,
It is my pleasure to provide you with the SSgA Funds annual report for the
fiscal year ended August 31, 1999. The SSgA Fund family has grown to include
twenty-three portfolios covering a broad range of investment strategies. The
enclosed information provides an overview of the investment process for the SSgA
Life Solutions Funds. This overview contains market updates, performance, and
financial information for the Fund. I hope you will find this information a
useful reference as you review your investment strategy.
During the past fiscal year, the SSgA Fund family has opened two new Funds. The
names and investment objectives for these funds are as follows:
The SSgA Aggressive Equity Fund seeks to maximize total return through investing
in US equity securities that are undervalued relative to their growth potential
as measured by SSgA's proprietary models.
The SSgA IAM Shares Fund seeks to maximize total return by investing primarily
in equity securities of companies that have entered into collective bargaining
agreements with the International Association of Machinists and Aerospace
Workers or affiliated labor unions.
Additionally, three SSgA Funds achieved a five-year track record during the 1999
fiscal year. These funds include the two institutional money market funds, SSgA
US Treasury and SSgA Prime Money Market Funds and the SSgA Emerging Markets
Fund. We are proud of our long-term record and look forward to having additional
funds complete their five-year anniversary.
In today's complex global marketplace, we are continually researching new
products and ideas to introduce to our fund family. Here at SSgA, we are
committed to providing a wide range of competitive investment vehicles to
fulfill your investment needs.
I would like to thank you for choosing the SSgA Funds.
Sincerely,
/s/ Nicholas A. Lopardo
Nicholas A. Lopardo
State Street Global Advisors
Chairman and Chief Executive Officer
4 Annual Report
<PAGE>
SSgA Intermediate Funds
- --------------------------------------------------------------------------------
Management of the Funds
- --------------------------------------------------------------------------------
[PHOTO]
Nicholas A. Lopardo
Chairman and Chief Executive Officer
A Team Approach to Investment Management
Our investment strategies are the product of the combined experience of our
professional staff. Portfolio Managers work together to develop and enhance the
techniques that drive our investment processes. As a result, the portfolios we
manage benefit from the knowledge of the entire team.
Mr. Heydon Traub, CFA, Principal, has been the portfolio manager primarily
responsible for investment decisions regarding the SSgA Life Solutions Funds
since April 1999. He joined the firm in 1987. Mr. Traub leads a team responsible
for the management of client assets in excess of $10 billion invested in 50
developed and emerging markets. He is one of the developers of the Firm's
country, stock, and currency selection processes and continues to lead the
research effort to enhance those strategies. Mr. Traub has written several
articles that have been published in leading investment journals and he
currently writes a monthly column on global investing for the Boston Business
Journal. He holds a BA in Economics from Brandeis University and an MBA in
Finance and Accounting from the University of Chicago. There are two other
portfolio managers working with Mr. Traub.
Annual Report 5
<PAGE>
SSgA Life Solutions Funds
- --------------------------------------------------------------------------------
Portfolio Management Discussion and Analysis
- --------------------------------------------------------------------------------
Strategy: Each Life Solutions Fund invests in shares of a combination of
underlying SSgA funds. By investing in the underlying component funds, each Life
Solutions Fund seeks to maintain different allocations among classes of equity,
international equity, fixed income and short-term assets funds (including money
market funds) depending on the Life Solutions Fund's investment objective and
risk profile. Allocating investments this way permits each Life Solutions Fund
to seek to optimize performance consistent with its investment objective.
Objective: Life Solutions Income and Growth Fund seeks income and, secondarily,
long-term growth of capital.
- --------------------------------------------------------------------------------
GROWTH OF A $10,000 INVESTMENT
<TABLE>
<CAPTION>
Life Solutions Lehman Brothers
Dates Income and Growth Fund Russell 3000(R)Index++ Aggregate Bond Index+++ Composite Market Index**
<S> <C> <C> <C> <C>
Inception* $10,000 $10,000 $10,000 $10,000
1997 $10,197 $10,351 $11,057 $10,204
1998 $10,558 $10,709 $11,258 $11,032
1999 $11,747 $14,839 $11,350 $12,606
</TABLE>
================================================================================
- --------------------------------------------------------------------------------
SSgA Life Solutions Income and Growth Fund
- --------------------------------------------------------------------------------
Period Ended Growth of Total
08/31/99 $10,000 Return
- ----------------- ---------- --------
1 Year $ 11,127 11.27%
Inception $ 11,747 7.72%+
- --------------------------------------------------------------------------------
Composite Market Index **
- --------------------------------------------------------------------------------
Period Ended Growth of Total
08/31/99 $10,000 Return
- ----------------- ---------- --------
1 Year $ 11,423 14.23%
Inception $ 12,606 11.26%+
** 35% Russell 3000(R) Index
5% MSCI EAFE Index
60% Lehman Brothers Aggregate Bond Index
- --------------------------------------------------------------------------------
Russell 3000(R) Index ++
- --------------------------------------------------------------------------------
Period Ended Growth of Total
08/31/99 $10,000 Return
- ----------------- ---------- --------
1 Year $ 13,848 38.48%
Inception $ 14,839 19.95%+
- --------------------------------------------------------------------------------
Lehman Brothers Aggregate Bond Index +++
- --------------------------------------------------------------------------------
Period Ended Growth of Total
08/31/99 $10,000 Return
- ----------------- ---------- --------
1 Year $ 10,080 0.80%
Inception $ 11,350 6.01%+
See related Notes for Index definitions.
6 Annual Report
<PAGE>
SSgA Life Solutions Funds
- --------------------------------------------------------------------------------
Portfolio Management Discussion and Analysis
- --------------------------------------------------------------------------------
Objective: Life Solutions Balanced Fund seeks a balance of growth of capital and
income.
- --------------------------------------------------------------------------------
GROWTH OF A $10,000 INVESTMENT
<TABLE>
<CAPTION>
Life Solutions Lehman Brothers
Dates Balanced Fund Russell 3000(R)Index++ Aggregate Bond Index+++ Composite Market Index**
<S> <C> <C> <C> <C>
Inception* $10,000 $10,000 $10,000 $10,000
1997 $10,212 $10,351 $11,057 $10,189
1998 $10,246 $10,709 $11,258 $10,855
1999 $12,079 $14,839 $11,350 $13,160
</TABLE>
================================================================================
- --------------------------------------------------------------------------------
SSgA Life Solutions Balanced Fund
- --------------------------------------------------------------------------------
Period Ended Growth of Total
08/31/99 $10,000 Return
- ----------------- ---------- --------
1 Year $ 11,789 17.89%
Inception $ 12,079 9.11%+
- --------------------------------------------------------------------------------
Composite Market Index **
- --------------------------------------------------------------------------------
Period Ended Growth of Total
08/31/99 $10,000 Return
- ----------------- ---------- --------
1 Year $ 12,119 21.19%
Inception $ 13,160 13.49%+
** 50% Russell 3000(R) Index
10% MSCI EAFE Index
40% Lehman Brothers Aggregate Bond Index
- --------------------------------------------------------------------------------
Russell 3000(R) Index ++
- --------------------------------------------------------------------------------
Period Ended Growth of Total
08/31/99 $10,000 Return
- ----------------- ---------- --------
1 Year $ 13,848 38.48%
Inception $ 14,839 19.95%+
- --------------------------------------------------------------------------------
Lehman Brothers Aggregate Bond Index +++
- --------------------------------------------------------------------------------
Period Ended Growth of Total
08/31/99 $10,000 Return
- ----------------- ---------- --------
1 Year $ 10,080 0.80%
Inception $ 11,350 6.01%+
See related Notes for Index definitions.
Annual Report 7
<PAGE>
SSgA Life Solutions Funds
- --------------------------------------------------------------------------------
Portfolio Management Discussion and Analysis
- --------------------------------------------------------------------------------
Objective: Life Solutions Growth Fund seeks long-term growth of capital.
- --------------------------------------------------------------------------------
GROWTH OF A $10,000 INVESTMENT
<TABLE>
<CAPTION>
Life Solutions Lehman Brothers
Dates Growth Fund Russell 3000(R)Index++ Aggregate Bond Index+++ Composite Market Index**
<S> <C> <C> <C> <C>
Inception* $10,000 $10,000 $10,000 $10,000
1997 $10,242 $10,351 $11,057 $10,173
1998 $9,968 $10,709 $11,258 $10,661
1999 $12,432 $14,839 $11,350 $13,702
</TABLE>
================================================================================
- --------------------------------------------------------------------------------
SSgA Life Solutions Growth Fund
- --------------------------------------------------------------------------------
Period Ended Growth of Total
08/31/99 $10,000 Return
- ----------------- ---------- --------
1 Year $ 12,472 24.72%
Inception $ 12,432 10.57%+
- --------------------------------------------------------------------------------
Composite Market Index **
- --------------------------------------------------------------------------------
Period Ended Growth of Total
08/31/99 $10,000 Return
- ----------------- ---------- --------
1 Year $ 12,847 28.47%
Inception $ 13,702 15.62%+
** 65% Russell 3000(R) Index
15% MSCI EAFE Index
20% Lehman Brothers Aggregate Bond Index
- --------------------------------------------------------------------------------
Russell 3000(R) Index ++
- --------------------------------------------------------------------------------
Period Ended Growth of Total
08/31/99 $10,000 Return
- ----------------- ---------- --------
1 Year $ 13,848 38.48%
Inception $ 14,839 19.95%+
- --------------------------------------------------------------------------------
Lehman Brothers Aggregate Bond Index +++
- --------------------------------------------------------------------------------
Period Ended Growth of Total
08/31/99 $10,000 Return
- ----------------- ---------- --------
1 Year $ 10,080 0.80%
Inception $ 11,350 6.01%+
See related Notes for Index definitions.
8 Annual Report
<PAGE>
SSgA Life Solutions Funds
- --------------------------------------------------------------------------------
Portfolio Management Discussion and Analysis
- --------------------------------------------------------------------------------
Performance Review
The SSgA Life Solutions Funds is a family of balanced funds targeted to meet the
investment objectives of investors with varying degrees of risk tolerance. The
family consists of three Funds with distinct risk/return profiles. The Life
Solutions Income and Growth Fund is targeted to investors with limited tolerance
for equity market volatility. The Life Solutions Balanced Fund is targeted at
those individuals willing to undertake greater equity exposure, but who are also
looking for fixed income exposure to balance return patterns. The Life Solutions
Growth Fund is designed for those investors aggressively seeking return by
providing broadly diversified equity exposure with limited exposure to fixed
income and cash securities.
For the fiscal year ended August 31, 1999, the Life Solutions Funds had the
following closing NAVs: Income and Growth Fund $12.93, Balanced Fund $13.80, and
Growth Fund $14.62. Performance for the Life Solutions Income and Growth,
Balanced Growth, and Growth Funds for the twelve months ended August 31, 1999,
was 11.27%, 17.89%, and 24.72%, respectively. The Funds' composite benchmarks
over the last twelve months returned 14.23%, 21.19%, and 28.47%, respectively.
The Funds' performance is net of operating expense, whereas Index results do not
include expenses of any kind.
The US equity component of the benchmark is the Russell 3000(R) Index, an
unmanaged index of US equities representing approximately 98% of traded equity
securities in the US The international component is comprised of the Morgan
Stanley/ Capital International Europe, Australia, Far East ("MSCI EAFE") Index,
an unmanaged index reflecting the performance of international markets around
the globe. The fixed income component of the benchmark is the Lehman Brothers
Aggregate Bond Index, an unmanaged index capturing the performance of the broad
US bond markets, including government, investment grade corporate, and
mortgage-backed securities.
Returns for the Funds were strong over the last fiscal year due to soaring
equity markets around the world. In particular, the more aggressive Funds
(Balanced and Growth) benefited from having the majority of each portfolio's
assets in equities. Large cap US stocks, which comprise a substantial portion of
the Funds, were a primary driver of high returns, as the S&P 500(R) Index gained
nearly 40% over the last year. Additionally, the Funds gained due to their
exposure to non-US stocks, as the MSCI EAFE Index returned 26%, while the IFCI
(a benchmark covering results in emerging markets), rose an amazing 69%. The
Funds have small exposures in emerging markets.
Annual results for the Funds relative to the composite benchmarks was adversely
impacted by underperformance from stock selection within the US equity market,
and concern over valuation risk in the US equity market. This was particularly
evident in the large-cap segment, leading the Fund to a strategic underweight
allocation. Although this caused the Funds to lag the benchmarks' returns, the
Funds did earn high absolute returns with less risk than the benchmarks.
Equity results were hampered by a continuation of narrow market performance
where large growth stocks have continued to provide the best returns.
Ironically, the Manager's focus on companies, which have an outlook toward
improving earnings and lower price multiples, has hurt stock selection.
Market and Portfolio Highlights
Toward the end of the prior fiscal year, the Manager's concerns over market
valuations proved well founded, as virtually all equity markets fell during the
financial crisis in Russia. These events were quickly followed by the Long Term
Capital Management credit crunch. The Funds boosted their equity commitments
following the decline, and as a result, were well positioned as equity markets
recovered. However, during the first eight months of 1999, interest rates
climbed steadily, reversing one of the key drivers behind the five year bull
market. This led the Funds to scale back their US equity positions once again.
Earnings growth has rebounded nicely during calendar 1999, greatly assisted by a
surprisingly strong economy, which in turn has helped the support the market's
recent rise. However, the Manager continues to be concerned about rising
interest rates, as bond yields have risen over 1% during the past twelve months,
while the Fed has raised rates twice in the last few months. The market has
wavered in recent months in the face of these higher rates, and the Funds'
underweighting in US equities has recently begun to pay off.
Annual Report 9
<PAGE>
SSgA Life Solutions Funds
- --------------------------------------------------------------------------------
Portfolio Management Discussion and Analysis
- --------------------------------------------------------------------------------
One of the key factors the Managers utilize in valuing the different asset
classes is a process which they believe to be similar to the recently disclosed
model the Fed uses to assess the equity market's fair value. Specifically, the
Manager analyzes the projected earnings yield (the inverse of the P/E ratio) of
the market. The model indicates, for every investment dollar, the return that
companies in aggregate provide in the form of earnings. Currently, this is
around the all-time low of 4% (with a P/E using calendar 1999's expected
earnings at 25). As a comparison, government bond yields are at 6%. The Manager
prefers having an ultra-safe (and known) return of 6% versus the riskier return
of 4% which stocks offer.
When reviewing similar information for non-US equity markets, most have a more
comparable earnings yield compared to the country's bond yield. The Managers
continue to be very comfortable owning international stocks, and they have
overweighted this asset class along with bonds.
- ------------------------------------------------------
Portfolio Allocation by Asset Class
as of 08/31/99
- ------------------------------------------------------
Income &
Growth Balanced Growth
Fund Fund Fund
----- ----- -----
Equities:
Domestic 26.3% 41.1% 57.7%
International 10.1 15.0 20.4
----- ----- -----
36.4 56.1 78.1
Bonds 63.8 44.2 23.4
Cash (0.2) (0.3) (1.5)
----- ----- -----
100.0% 100.0% 100.0%
===== ===== =====
- ------------------------------------------------------
----------------------
Notes: The following notes relate to the Growth of $10,000 graph and table on
the preceding pages.
* The Life Solutions Funds commenced operations on July 1, 1997. Index
comparisons also began on July 1, 1997.
+ Annualized.
Index Definitions:
++ The Russell 3000(R) Index is comprised of the 3,000 largest US companies
based on total market capitalization, representing approximately 98% of
the investable US equity market.
The Morgan Stanley Capital International Europe, Australia, Far East Index
is an index composed of an arithmetic, market value-weighted average of
the performance of over 1,100 securities listed on the stock exchanges of
the countries of Europe, Australia, and the Far East. The Index is
calculated on a total-return basis, which includes reinvestment of net
dividends after deduction of withholding taxes.
+++ The Lehman Brothers Aggregate Bond Index is composed of all bonds covered
by the Lehman Brothers Government/Corporate Bond Index, Mortgage-Backed
Securities Index, and the Asset-Backed Securities Index. Total returns
comprises price appreciation/depreciation and income as a percentage of
the original investment.
Performance is historical and assumes reinvestment of all dividends and capital
gains. Investment return and principal value will fluctuate so that an
investor's shares, when redeemed, may be worth more or less than when purchased.
Past performance is not indicative of future results.
10 Annual Report
<PAGE>
Report of Independent Accountants
To the Shareholders and Board of Trustees
of the SSgA Funds:
In our opinion, the accompanying statements of net assets, and the related
statements of operations and of changes in net assets and the financial
highlights present fairly, in all material respects, the financial position of
SSgA Life Solutions Funds (in this report, comprised of SSgA Life Solutions
Income and Growth Fund, SSgA Life Solutions Balanced Fund, and SSgA Life
Solutions Growth Fund)(the "Funds") at August 31, 1999, the results of their
operations for the fiscal year then ended and the changes in their net assets
for each of the two fiscal years in the period then ended, and the financial
highlights for each of the two fiscal years in the period then ended and for the
period July 1, 1997 (commencement of operations) to August 31, 1997, in
conformity with generally accepted accounting principles. These financial
statements and financial highlights (hereafter referred to as "financial
statements") are the responsibility of the Funds' management; our responsibility
is to express an opinion on these financial statements based on our audits. We
conducted our audits of these financial statements in accordance with generally
accepted auditing standards which require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at August 31, 1999 by
correspondence with the transfer agent, provide a reasonable basis for the
opinion expressed above.
Boston, Massachusetts
October 11, 1999
/s/ PricewaterhouseCoopers LLP
Annual Report 11
<PAGE>
SSgA Life Solutions
Income and Growth Fund
Statement of Net Assets
August 31, 1999
Number Value
of (000)
Shares $
--------- ------
Investments
Domestic Equities - 26.3%
SSgA Aggressive Equity Fund ................ 46,116 587
SSgA Matrix Equity Fund .................... 233,863 4,095
SSgA S&P 500 Index Fund .................... 38,724 919
SSgA Small Cap Fund ........................ 65,349 1,160
------
6,761
------
International Equities - 10.1%
SSgA Active International Fund ............. 228,636 2,371
SSgA Emerging Markets Fund ................. 22,897 240
------
2,611
------
Bonds - 63.8%
SSgA Bond Market Fund ...................... 1,435,019 13,819
SSgA High Yield Bond Fund .................. 166,447 1,718
SSgA Intermediate Fund ..................... 91,772 873
------
16,410
------
Short-Term Assets - 1.6%
SSgA Money Market Fund (a) ................. 419,912 420
------
Total Investments - 101.8%
(identified cost $26,177) ........................................ 26,202
------
Other Assets and Liabilities
Deferred organization expenses ................................... 21
Receivable from Adviser .......................................... 12
Other assets ..................................................... 2
Liabilities ...................................................... (495)
------
Total Other Assets and Liabilities,
Net - (1.8%) ..................................................... (460)
------
Net Assets - 100.0% .............................................. 25,742
======
12 Annual Report
<PAGE>
SSgA Life Solutions
Income and Growth Fund
Statement of Net Assets, continued
August 31, 1999
Value
(000)
$
------
Net Assets Consist of:
Undistributed net investment income .............................. 574
Accumulated net realized gain (loss) ............................. (254)
Unrealized appreciation (depreciation) on investments ............ 25
Shares of beneficial interest .................................... 2
Additional paid-in capital ....................................... 25,395
------
Net Assets ....................................................... 25,742
======
Net Asset Value, offering and redemption price per share:
($25,741,781 divided by 1,990,461 shares of $.001 par value
shares of beneficial interest outstanding) ..................... 12.93
======
(a) At cost, which approximates market.
See the accompanying notes which are an integral part of the financial
statements.
Annual Report 13
<PAGE>
SSgA Life Solutions
Income and Growth Fund
Statement of Operations
Amounts in thousands For the Fiscal Year Ended August 31, 1999
<TABLE>
<S> <C> <C>
Investment Income
Income distributions from Underlying Funds ..................... $ 1,046
Expenses
Distribution fees .................................. $ 5
Transfer agent fees ................................ 22
Fund accounting fees ............................... 16
Professional fees .................................. 11
Registration fees .................................. 31
Shareholder servicing fees ......................... 36
Amortization of deferred organization expenses ..... 5
Miscellaneous ...................................... 12
--------
Expenses before reductions ......................... 138
Expense reductions ................................. (14)
--------
Expenses, net .................................................. 124
--------
Net investment income ............................................ 922
--------
Net Realized and Unrealized Gain (Loss)
Net realized gain (loss) on:
Investments ........................................ (205)
Capital gain distributions from Underlying Funds ... 1,271 1,066
--------
Net change in unrealized appreciation (depreciation)
on investments ................................................. 758
--------
Net realized and unrealized gain (loss) .......................... 1,824
--------
Net increase (decrease) in net assets resulting from
operations ..................................................... $ 2,746
========
</TABLE>
See the accompanying notes which are an integral part of the financial
statements.
14 Annual Report
<PAGE>
SSgA Life Solutions
Income and Growth Fund
Statement of Changes in Net Assets
Amounts in thousands For the Fiscal Years Ended August 31,
<TABLE>
<CAPTION>
1999 1998
-------- --------
<S> <C> <C>
Increase (Decrease) in Net Assets
Operations
Net investment income .................................. $ 922 $ 585
Net realized gain (loss) ............................... 1,066 752
Net change in unrealized appreciation (depreciation) ... 758 (956)
-------- --------
Net increase (decrease) in net assets resulting
from operations ..................................... 2,746 381
-------- --------
Distributions
From net investment income ............................. (1,186) (483)
From net realized gain on investments .................. (983) (376)
-------- --------
Net decrease from distributions ..................... (2,169) (859)
-------- --------
Share Transactions
Net increase (decrease) in net assets from share
transactions ........................................... 1,394 10,270
-------- --------
Total Net Increase (Decrease) in Net Assets .............. 1,971 9,792
Net Assets
Beginning of period .................................... 23,771 13,979
-------- --------
End of period (including undistributed net
investment income of $574 and $414, respectively) ... $ 25,742 $ 23,771
======== ========
</TABLE>
See the accompanying notes which are an integral part of the financial
statements.
Annual Report 15
<PAGE>
SSgA Life Solutions
Income and Growth Fund
Financial Highlights
The following table includes selected data for a share outstanding throughout
each period and other performance information derived from the financial
statements.
<TABLE>
<CAPTION>
Fiscal Years Ended August 31,
----------------------------------------
1999 1998 1997*
---------- ---------- ----------
<S> <C> <C> <C>
Net Asset Value, Beginning of Period .......... $ 12.65 $ 12.93 $ 12.68
---------- ---------- ----------
Income From Operations
Net investment income (a) ................... .44 .46 --
Net realized and unrealized gain (loss) ..... .95 (.01) .25
---------- ---------- ----------
Total Income From Operations .............. 1.39 .45 .25
---------- ---------- ----------
Distributions
From net investment income .................. (.61) (.41) --
From net realized gain on investments ....... (.50) (.32) --
---------- ---------- ----------
Total Distributions ....................... (1.11) (.73) --
---------- ---------- ----------
Net Asset Value, End of Period ................ $ 12.93 $ 12.65 $ 12.93
========== ========== ==========
Total Return (%)(b) ........................... 11.27 3.53 1.97
Ratios/Supplemental Data:
Net Assets, end of period ($ in thousands) .. 25,742 23,771 13,979
Ratios to average net assets (%)(c):
Operating expenses, net (d) ............... .45 .45 .35
Operating expenses, gross (d) ............. .50 .72 1.14
Net investment income ..................... 3.37 3.00 .16
Portfolio turnover rate (%)(c) .............. 93.34 93.28 106.68
</TABLE>
* For the period July 1, 1997 (commencement of operations) to August 31,
1997.
(a) For the periods subsequent to August 31, 1997, average month-end shares
outstanding were used for this calculation.
(b) Periods less than one year are not annualized.
(c) The ratios for the period ended August 31, 1997 are annualized.
(d) See Note 4 for current period amounts and Underlying Funds.
16 Annual Report
<PAGE>
(This page has been left blank intentionally.)
<PAGE>
SSgA Life Solutions
Balanced Fund
Statement of Net Assets
August 31, 1999
Number Value
of (000)
Shares $
--------- ------
Investments
Domestic Equities - 41.1%
SSgA Aggressive Equity Fund ................... 266,513 3,393
SSgA Matrix Equity Fund ....................... 1,368,851 23,969
SSgA S&P 500 Index Fund ....................... 305,907 7,262
SSgA Small Cap Fund ........................... 342,777 6,084
-------
40,708
-------
International Equities - 15.0%
SSgA Active International Fund ................ 1,276,875 13,241
SSgA Emerging Markets Fund .................... 151,149 1,582
-------
14,823
-------
Bonds - 44.2%
SSgA Bond Market Fund ......................... 3,690,400 35,539
SSgA High Yield Bond Fund ..................... 431,204 4,450
SSgA Intermediate Fund ........................ 401,470 3,818
-------
43,807
-------
Short-Term Assets - 0.7%
SSgA Money Market Fund (a) .................... 712,126 712
-------
Total Investments - 101.0%
(identified cost $97,656) .................................... 100,050
-------
Other Assets and Liabilities
Deferred organization expenses ............................... 21
Other assets ................................................. 3
Liabilities .................................................. (982)
-------
Total Other Assets and Liabilities,
Net - (1.0%) ................................................. (958)
-------
Net Assets - 100.0% .......................................... 99,092
=======
18 Annual Report
<PAGE>
SSgA Life Solutions
Balanced Fund
Statement of Net Assets, continued
August 31, 1999
Value
(000)
$
------
Net Assets Consist of:
Undistributed net investment income ............................... 1,531
Accumulated net realized gain (loss) .............................. (1,423)
Unrealized appreciation (depreciation) on investments ............. 2,394
Shares of beneficial interest ..................................... 7
Additional paid-in capital ........................................ 96,583
-------
Net Assets ........................................................ 99,092
=======
Net Asset Value, offering and redemption price per share:
($99,092,002 divided by 7,178,868 shares of $.001 par value
shares of beneficial interest outstanding) ...................... 13.80
=======
(a) At cost, which approximates market.
See the accompanying notes which are an integral part of the financial
statements.
Annual Report 19
<PAGE>
SSgA Life Solutions
Balanced Fund
Statement of Operations
Amounts in thousands For the Fiscal Year Ended August 31, 1999
<TABLE>
<S> <C> <C>
Investment Income
Income distributions from Underlying Funds ................................... $ 3,116
Expenses
Distribution fees ................................................. $ 20
Transfer agent fees ............................................... 26
Fund accounting fees .............................................. 19
Professional fees ................................................. 13
Registration fees ................................................. 33
Shareholder servicing fees ........................................ 130
Amortization of deferred organization expenses .................... 5
Miscellaneous ..................................................... 33
--------
Total Expenses ............................................................ 279
--------
Net investment income ........................................................... 2,837
--------
Net Realized and Unrealized Gain (Loss)
Net realized gain (loss) on:
Investments ....................................................... (1,075)
Capital gain distributions from Underlying Funds .................. 6,414 5,339
--------
Net change in unrealized appreciation (depreciation) on investments ............. 7,816
--------
Net realized and unrealized gain (loss) ......................................... 13,155
--------
Net increase (decrease) in net assets resulting from operations ................. $ 15,992
========
</TABLE>
See the accompanying notes which are an integral part of the financial
statements.
20 Annual Report
<PAGE>
SSgA Life Solutions
Balanced Fund
Statement of Changes in Net Assets
Amounts in thousands For the Fiscal Years Ended August 31,
<TABLE>
<CAPTION>
1999 1998
-------- --------
<S> <C> <C>
Increase (Decrease) in Net Assets
Operations
Net investment income ............................................... $ 2,837 $ 1,684
Net realized gain (loss) ............................................ 5,339 3,827
Net change in unrealized appreciation (depreciation) ................ 7,816 (6,414)
-------- --------
Net increase (decrease) in net assets resulting from operations .. 15,992 (903)
-------- --------
Distributions
From net investment income .......................................... (4,043) (2,063)
In excess of net investment income .................................. (268)
From net realized gain on investments ............................... (5,336) (1,900)
-------- --------
Net decrease from distributions .................................. (9,647) (3,963)
-------- --------
Share Transactions
Net increase (decrease) in net assets from share transactions ....... 1,943 48,667
-------- --------
Total Net Increase (Decrease) in Net Assets ............................ 8,288 43,801
Net Assets
Beginning of period ................................................. 90,804 47,003
-------- --------
End of period (including undistributed net investment income
of $1,531 and $1,206, respectively) .............................. $ 99,092 $ 90,804
======== ========
</TABLE>
See the accompanying notes which are an integral part of the financial
statements.
Annual Report 21
<PAGE>
SSgA Life Solutions
Balanced Fund
Financial Highlights
The following table includes selected data for a share outstanding throughout
each period and other performance information derived from the financial
statements.
<TABLE>
<CAPTION>
Fiscal Years Ended August 31,
----------------------------------------
1999 1998 1997*
---------- ---------- ----------
<S> <C> <C> <C>
Net Asset Value, Beginning of Period ............ $ 12.95 $ 13.98 $ 13.69
---------- ---------- ----------
Income From Operations
Net investment income (a) .................... .38 .50 --
Net realized and unrealized gain (loss) ...... 1.84 (.45) .29
---------- ---------- ----------
Total Income From Operations .............. 2.22 .05 .29
---------- ---------- ----------
Distributions
From net investment income ................... (.61) (.56) --
From net realized gain on investments ........ (.76) (.52) --
---------- ---------- ----------
Total Distributions ....................... (1.37) (1.08) --
---------- ---------- ----------
Net Asset Value, End of Period .................. $ 13.80 $ 12.95 $ 13.98
========== ========== ==========
Total Return (%)(b) ............................. 17.89 .33 2.12
Ratios/Supplemental Data:
Net Assets, end of period ($ in thousands) ... 99,092 90,804 47,003
Ratios to average net assets (%)(c):
Operating expenses, net (d) ............... .28 .36 .35
Operating expenses, gross (d) ............. .28 .36 .49
Net investment income ..................... 2.83 2.07 .07
Portfolio turnover rate (%)(c) ............... 51.09 101.40 51.61
</TABLE>
* For the period July 1, 1997 (commencement of operations) to August 31,
1997.
(a) For the periods subsequent to August 31, 1997, average month-end shares
outstanding were used for this calculation.
(b) Periods less than one year are not annualized.
(c) The ratios for the period ended August 31, 1997 are annualized.
(d) See Note 4 for current period amounts and Underlying Funds.
22 Annual Report
<PAGE>
(This page has been left blank intentionally.)
<PAGE>
SSgA Life Solutions
Growth Fund
Statement of Net Assets
August 31, 1999
Number Value
of (000)
Shares $
--------- ------
Investments
Domestic Equities - 57.7%
SSgA Aggressive Equity Fund ................ 250,630 3,191
SSgA Matrix Equity Fund .................... 1,238,702 21,689
SSgA S&P 500 Index Fund .................... 299,825 7,118
SSgA Small Cap Fund ........................ 309,459 5,493
------
37,491
------
International Equities - 20.4%
SSgA Active International Fund ............. 1,139,651 11,818
SSgA Emerging Markets Fund ................. 137,957 1,444
------
13,262
------
Bonds - 23.4%
SSgA Bond Market Fund ...................... 1,259,056 12,125
SSgA High Yield Bond Fund .................. 150,130 1,549
SSgA Intermediate Fund ..................... 165,180 1,571
------
15,245
------
Short-Term Assets - 0.9%
SSgA Money Market Fund (a) ................. 602,159 602
------
Total Investments - 102.4%
(identified cost $64,302) ......................................... 66,600
------
Other Assets and Liabilities
Deferred organization expenses .................................... 21
Other assets ...................................................... 3
Liabilities ....................................................... (1,606)
------
Total Other Assets and Liabilities,
Net - (2.4%) ...................................................... (1,582)
------
Net Assets - 100.0% ............................................... 65,018
======
24 Annual Report
<PAGE>
SSgA Life Solutions
Growth Fund
Statement of Net Assets, continued
August 31, 1999
Value
(000)
$
------
Net Assets Consist of:
Undistributed net investment income ............................... 513
Accumulated net realized gain (loss) .............................. (955)
Unrealized appreciation (depreciation) on investments ............. 2,298
Shares of beneficial interest ..................................... 4
Additional paid-in capital ........................................ 63,158
------
Net Assets ........................................................ 65,018
======
Net Asset Value, offering and redemption price per share:
($65,018,418 divided by 4,446,249 shares of $.001 par value
shares of beneficial interest outstanding) ..................... 14.62
======
(a) At cost, which approximates market.
See the accompanying notes which are an integral part of the financial
statements.
Annual Report 25
<PAGE>
SSgA Life Solutions
Growth Fund
Statement of Operations
Amounts in thousands For the Fiscal Year Ended August 31, 1999
<TABLE>
<S> <C> <C>
Investment Income
Income distributions from Underlying Funds ................................... $ 1,462
Expenses
Distribution fees ................................................. $ 13
Transfer agent fees ............................................... 28
Fund accounting fees .............................................. 26
Professional fees ................................................. 13
Registration fees ................................................. 42
Shareholder servicing fees ........................................ 87
Amortization of deferred organization expenses .................... 5
Miscellaneous ..................................................... 33
--------
Total Expenses ............................................................ 247
--------
Net investment income ........................................................... 1,215
--------
Net Realized and Unrealized Gain (Loss)
Net realized gain (loss) on:
Investments ....................................................... (789)
Capital gain distributions from Underlying Funds .................. 4,854 4,065
--------
Net change in unrealized appreciation (depreciation) on investments ............. 8,203
--------
Net realized and unrealized gain (loss) ......................................... 12,268
--------
Net increase (decrease) in net assets resulting from operations ................. $ 13,483
========
</TABLE>
See the accompanying notes which are an integral part of the financial
statements.
26 Annual Report
<PAGE>
SSgA Life Solutions
Growth Fund
Statement of Changes in Net Assets
Amounts in thousands For the Fiscal Years Ended August 31,
<TABLE>
<CAPTION>
1999 1998
-------- --------
<S> <C> <C>
Increase (Decrease) in Net Assets
Operations
Net investment income ................................................ $ 1,215 $ 818
Net realized gain (loss) ............................................. 4,065 3,992
Net change in unrealized appreciation (depreciation) ................. 8,203 (6,889)
-------- --------
Net increase (decrease) in net assets resulting from operations ... 13,483 (2,079)
-------- --------
Distributions
From net investment income ........................................... (1,693) (825)
In excess of net investment income ................................... (647) (1,350)
From net realized gain on investments ................................ (3,927) (2,112)
-------- --------
Net decrease from distributions ................................... (6,267) (4,287)
-------- --------
Share Transactions
Net increase (decrease) in net assets from share transactions ........ 4,370 16,195
-------- --------
Total Net Increase (Decrease) in Net Assets ............................. 11,586 9,829
Net Assets
Beginning of period .................................................. 53,432 43,603
-------- --------
End of period (including undistributed net investment income
of $513 and $478, respectively) ................................... $ 65,018 $ 53,432
======== ========
</TABLE>
See the accompanying notes which are an integral part of the financial
statements.
Annual Report 27
<PAGE>
SSgA Life Solutions
Growth Fund
Financial Highlights
The following table includes selected data for a share outstanding throughout
each period and other performance information derived from the financial
statements.
<TABLE>
<CAPTION>
Fiscal Years Ended August 31,
----------------------------------------
1999 1998 1997*
---------- ---------- ----------
<S> <C> <C> <C>
Net Asset Value, Beginning of Period ............. $ 13.02 $ 14.79 $ 14.44
---------- ---------- ----------
Income From Operations
Net investment income (a) ..................... .26 .38 --
Net realized and unrealized gain (loss) ....... 2.81 (.75) .35
---------- ---------- ----------
Total Income From Operations ............... 3.07 (.37) .35
---------- ---------- ----------
Distributions
From net investment income .................... (.55) (.71) --
From net realized gain on investments ......... (.92) (.69) --
---------- ---------- ----------
Total Distributions ........................ (1.47) (1.40) --
---------- ---------- ----------
Net Asset Value, End of Period ................... $ 14.62 $ 13.02 $ 14.79
========== ========== ==========
Total Return (%)(b) .............................. 24.72 (2.68) 2.42
Ratios/Supplemental Data:
Net Assets, end of period ($ in thousands) .... 65,018 53,432 43,603
Ratios to average net assets (%)(c):
Operating expenses, net (d) ................ .38 .41 .35
Operating expenses, gross (d) .............. .38 .41 .54
Net investment income ...................... 1.89 1.52 .09
Portfolio turnover rate (%)(c) ................ 43.15 67.66 39.49
</TABLE>
* For the period July 1, 1997 (commencement of operations) to August 31,
1997.
(a) For the periods subsequent to August 31, 1997, average month-end shares
outstanding were used for this calculation.
(b) Periods less than one year are not annualized.
(c) The ratios for the period ended August 31, 1997 are annualized.
(d) See Note 4 for current period amounts and Underlying Funds.
28 Annual Report
<PAGE>
SSgA
Life Solutions Funds
Notes to Financial Statements
August 31, 1999
1. Organization
The SSgA Funds (the "Investment Company") is a series mutual fund,
currently comprised of 23 investment portfolios which are in operation as
of August 31, 1999. These financial statements report on three portfolios,
the SSgA Life Solutions Income and Growth Fund, Balanced Fund and Growth
Fund (the "Funds"). The Investment Company is a registered and diversified
open-end investment company, as defined in the Investment Company Act of
1940, as amended (the "1940 Act"), that was organized as a Massachusetts
business trust on October 3, 1987 and operates under a First Amended and
Restated Master Trust Agreement, dated October 13, 1993, as amended (the
"Agreement"). The Investment Company's Agreement permits the Board of
Trustees to issue an unlimited number of full and fractional shares of
beneficial interest at a $.001 par value. The Funds are designed primarily
for tax-advantaged retirement accounts and other long-term investment
strategies. Each Fund allocates its assets by investing in shares of a
combination of the Investment Company's portfolios (the "Underlying
Funds"). The table below illustrates the equity, bond and short-term fund
asset allocation ranges for each Fund.
<TABLE>
<CAPTION>
Asset Class/Underlying Fund Asset Allocation Ranges
-------------------------------------------
Income and Balanced Growth
Growth Fund Fund Fund
-------------- ------------- ------------
<S> <C> <C> <C>
Equities
US Equities 20 - 60% 40 - 80% 60 - 100%
SSgA S&P 500 Index Fund
SSgA Matrix Equity Fund
SSgA Small Cap Fund
SSgA Growth and Income Fund
SSgA Special Equity Fund
SSgA Real Estate Equity Fund
SSgA Aggressive Equity Fund
International Equities* 15% 20% 25%
SSgA Active International Fund
SSgA Emerging Markets Fund
SSgA International Growth Opportunities Fund
Bonds 40 - 80% 20 - 60% 0 - 40%
SSgA Bond Market Fund
SSgA Intermediate Fund
SSgA High Yield Bond Fund
SSgA Yield Plus Fund
Short Term Assets 0 - 20% 0 - 20% 0 - 20%
SSgA Money Market Fund
SSgA US Government Money Market Fund
</TABLE>
* International equities are included in the total equity
exposure indicated above and should not exceed the listed
percentages.
Annual Report 29
<PAGE>
SSgA
Life Solutions Funds
Notes to Financial Statements, continued
August 31, 1999
Objectives of the Underlying Funds:
The Life Solutions Funds are comprised of various combinations of the
Underlying Funds. Each of the Life Solutions Funds will invest in at least
six of the Underlying Funds. The Board of Trustees has approved investment
in all of the Underlying Funds presented above. The fundamental investment
objectives of the Underlying Funds utilized by the Life Solutions Funds
are listed below.
SSgA S&P 500 Index Fund: To seek to replicate the total return of the S&P
500 Index.
SSgA Matrix Equity Fund: To provide total returns that exceed over time
the S&P 500 Index through investment in equity securities.
SSgA Small Cap Fund: To maximize total return through investment in equity
securities; under normal market conditions, at least 65% of total assets
will be invested in securities of smaller capitalized issuers.
SSgA Growth and Income Fund: To achieve long-term capital growth, current
income and growth of income primarily through investments in equity
securities.
SSgA Special Equity Fund: To maximize total return through investment in
mid- and small capitalization US equity securities.
SSgA Tuckerman Active REIT Fund (formerly SSgA Real Estate Equity Fund):
To provide income and capital growth by investing primarily in publicly
traded securities of real estate companies.
SSgA Aggressive Equity Fund: To maximize total return through investing in
US equity securities that are under-valued relative to their growth
potential as measured by SSgA's proprietary models.
SSgA Active International Fund: To provide long-term capital growth by
investing primarily in securities of foreign issuers.
SSgA Emerging Markets Fund: To provide maximum total return, primarily
through capital appreciation, by investing in securities of foreign
issuers.
SSgA International Growth Opportunities Fund: To provide long-term capital
growth by investing primarily in securities of foreign issuers.
SSgA Bond Market Fund: To maximize total return by investing in fixed
income securities, including, but not limited to, those represented by the
Lehman Brothers Aggregate Bond Index (the "LBAB Index").
SSgA Intermediate Fund: To seek a high level of current income while
preserving principal by investing primarily in a diversified portfolio of
debt securities with a dollar-weighted average maturity between three and
ten years.
SSgA High Yield Bond Fund: To maximize total return by investing in fixed
income securities, including, but not limited to, those represented by the
Lehman Brothers High Yield Bond Index.
SSgA Yield Plus Fund: To seek high current income and liquidity by
investing in a diversified portfolio of high-quality debt securities and
by maintaining a portfolio duration of one year or less.
30 Annual Report
<PAGE>
SSgA
Life Solutions Funds
Notes to Financial Statements, continued
August 31, 1999
SSgA Money Market Fund: To maximize current income, to the extent
consistent with the preservation of capital and liquidity and the
maintenance of a stable $1.00 per share net asset value, by investing in
dollar dominated securities with remaining maturities of one year or less.
SSgA US Government Money Market Fund: To maximize current income to the
extent consistent with the preservation of capital and liquidity and the
maintenance of a stable $1.00 per share net asset value, by investing in
obligations of the US Government or its agencies or instrumentalities with
remaining maturities of one year or less.
2. Significant Accounting Policies
The Funds' financial statements are prepared in accordance with generally
accepted accounting principles which require the use of management
estimates. The following is a summary of the significant accounting
policies consistently followed by the Funds in the preparation of their
financial statements.
Security valuation: Investments in Underlying Funds are valued at the net
asset value per share of each Underlying Fund as of the close of regular
trading on the New York Stock Exchange.
Securities transactions: Securities transactions of the Underlying Funds
are recorded on a trade date basis. Realized gains and losses from
securities transactions are recorded on the basis of identified cost.
Investment income: Distributions of income and capital gains are recorded
from the underlying funds on the accrual basis.
Federal income taxes: Since the Investment Company is a Massachusetts
business trust, each fund is a separate corporate taxpayer and determines
its net investment income and capital gains (or losses) and the amounts to
be distributed to each fund's shareholders without regard to the income
and capital gains (or losses) of the other funds.
It is each Fund's intention to qualify as a regulated investment company,
as defined by the Internal Revenue Code of 1986, as amended. This requires
the Funds to distribute all of their taxable income. Therefore, the Funds
paid no federal income taxes and no federal income tax provision was
required. As permitted by tax regulations, the Growth Fund intends to
defer a net realized capital loss of $32,528 incurred from November 1,
1998 to August 31, 1999, and treat it as arising in fiscal year 2000.
The Funds' aggregate cost of investments and the composition of unrealized
appreciation and depreciation of investment securities for federal income
tax purposes as of August 31, 1999 are as follows:
<TABLE>
<CAPTION>
Net
Unrealized
Federal Tax Unrealized Unrealized Appreciation
Cost Appreciation (Depreciation) (Depreciation)
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Income and Growth Fund $ 26,637,418 $ 12,228,961 $(12,664,822) $ (435,861)
Balanced Fund 99,436,011 1,272,878 (658,646) 614,232
Growth Fund 65,278,164 1,991,486 (669,056) 1,322,430
</TABLE>
Annual Report 31
<PAGE>
SSgA
Life Solutions Funds
Notes to Financial Statements, continued
August 31, 1999
Dividends and distributions to shareholders: Income dividends and capital
gain distributions, if any, are recorded on the ex-dividend date.
Dividends are generally declared and paid quarterly. Capital gain
distributions are generally declared and paid annually. An additional
distribution may be paid by the Funds to avoid imposition of federal
income tax on any remaining undistributed net investment income and
capital gains.
The timing and characterization of certain income and capital gain
distributions are determined in accordance with federal tax regulations
which may differ from generally accepted accounting principles ("GAAP").
As a result, net investment income and net realized gain (or loss) from
investment transactions for a reporting period may differ significantly
from distributions during such period. The differences between tax
regulations and GAAP relate primarily to certain securities sold at a
loss. Accordingly, the Funds may periodically make reclassifications among
certain of their capital accounts without impacting their net asset value.
Expenses: The Funds will pay all of their expenses other than those
expressly assumed by the Adviser and the Administrator. Certain expenses
not directly attributable to any one Fund but applicable to all Funds,
such as Trustee fees, insurance, legal and other expenses will be
allocated to each Fund based on each Fund's net assets. Expenses included
in the accompanying statements of operations reflect the expenses of each
Fund and do not include any expenses associated with the Underlying Funds.
Deferred organization expenses: The Funds have incurred expenses in
connection with their organization. These costs were deferred and are
being amortized over sixty months on a straight-line basis.
3. Securities Transactions
Investment transactions: For the year ended August 31, 1999, purchases and
sales of the Underlying Funds aggregated to the following:
Purchases Sales
------------ ------------
Income and Growth Fund $ 26,113,622 $ 24,211,174
Balanced Fund 52,684,409 50,224,443
Growth Fund 32,798,539 27,094,011
4. Related Parties
Adviser: The Investment Company has an investment advisory agreement with
State Street Bank and Trust Company (the "Adviser") under which the
Adviser directs the investments of the Fund in accordance with its
investment objectives, policies, and limitations. The Funds will not be
charged a fee by the Adviser. However, each Fund, as a shareholder in the
Underlying Funds, will bear its proportionate share of any investment
advisory fees and other expenses paid by the Underlying Funds. Each
Underlying Fund pays the Adviser a fee, calculated daily and paid monthly,
that on an annual basis is equal to a certain percentage of each
Underlying Fund's average daily net assets. For the year ended August 31,
1999, the Adviser voluntarily agreed to reimburse the Funds for all
expenses (except 12b-1 distribution and shareholder servicing expenses) in
excess of .30% of average daily net assets on an annual basis.
In addition, the Fund has entered into arrangements with its Adviser
whereby credits realized as a result of uninvested cash balances were used
to reduce a portion of the Fund's expenses. During the period, the
custodian fees for the Income and Growth Fund, Balanced Fund and Growth
Fund were reduced by $138, $239 and $163, respectively, under these
arrangements.
32 Annual Report
<PAGE>
SSgA
Life Solutions Funds
Notes to Financial Statements, continued
August 31, 1999
Administrator: The Investment Company has an administration agreement with
Frank Russell Investment Management Company (the "Administrator"), a
wholly owned subsidiary of The Northwestern Mutual Life Insurance Company,
under which the Administrator supervises all non-portfolio investment
aspects of the Investment Company's operations and provides adequate
office space and all necessary office equipment and services, including
telephone service, utilities, stationery supplies, and similar items. For
these services, the Underlying Funds pay the Administrator a combined fee
that on an annual basis is equal to the percentages, stated below, of
their average aggregate daily net assets. The Funds will not be charged a
fee by the Administrator. Instead, the Administrator will assess
administration fees on the Underlying Funds. Each Fund will pay indirectly
its proportionate share of the following: All Underlying Funds combined
(except Active International, Emerging Markets and International Growth
Opportunities) up to and including $500 million - .06%; over $500 million
up to and including $1 billion - .05%; and over $1 billion - .03%. Active
International, Emerging Markets and International Growth Opportunities up
to and including $500 million - .07%; over $500 million up to and
including $1 billion - .06%; over $1 billion up to and including $1.5
billion - .04%; and over $1.5 billion - .03%.
The percentage of the fee paid by the each Underlying Fund is equal to the
percentage of average aggregate daily net assets that are attributable to
that Underlying Fund. Administrator will also receive reimbursement of
expenses it incurs in connection with establishing new investment
portfolios, including the Funds. Further, the administration fee paid by
the Underlying Funds will be reduced by the sum of certain distribution
related expenses (up to a maximum of 10%, for the period September 1, 1997
to December 31, 1997, and up to a maximum of 5%, for the period January 1,
1998 to December 31, 1998, and 0% thereafter, of the asset-based
administration fee listed above).
Distributor and Shareholder Servicing: Pursuant to the Distribution
Agreement with Investment Company, Russell Fund Distributors, Inc.
("Distributor"), a wholly owned subsidiary of the Administrator, serves as
distributor for all Investment Company portfolio shares, including the
Funds.
The Funds and Underlying Funds have a distribution plan pursuant to Rule
12b-1 (the "Plan") under the 1940 Act. The purpose of the Plan is to
provide for the payment of certain Investment Company distribution and
shareholder servicing expenses. Under the Plan, Distributor will be
reimbursed in an amount up to .25% of the Funds and Underlying Funds'
average annual net assets for distribution-related and shareholder
servicing expenses. Payments under the Plan will be made to Distributor to
finance activity that is intended to result in the sale and retention of
the Funds and Underlying Fund shares including: (1) payments made to
certain broker-dealers, investments advisors and other third party
intermediaries; (2) the costs of prospectuses, reports to shareholders and
sales literature; (3) advertising; and (4) expenses incurred in connection
with the promotion and sale of shares, including Distributor's overhead
expenses for rent, office supplies, equipment, travel, communication,
compensation and benefits of sales personnel.
Payments to Distributor, as well as payments to Service Organizations from
a Fund, are not permitted by the Plan to exceed .25% of a Fund's average
net asset value per year. Any payments that are required to be made by the
Distribution Agreement and any Service Agreement but could not be made
because of the .25% limitation may be carried forward and paid in
subsequent years so long as the Plan is in effect. A Fund's liability for
any such expenses carried forward shall terminate at the end of two years
following the year in which the expenditure was incurred. The Trustees or
a majority of the Fund's shareholders have the right, however, to
terminate the Plan and
Annual Report 33
<PAGE>
SSgA
Life Solutions Funds
Notes to Financial Statements, continued
August 31, 1999
all payments thereunder at anytime. The Fund will not be obligated to
reimburse the Distributor for carryover expenses subsequent to the Plan's
termination or noncontinuance. There were no carryover expenses as of
August 31, 1999. Service Organizations will be responsible for prompt
transmission of purchase and redemption orders and may charge fees for
their services.
The Funds have entered into service agreements with State Street Solutions
("Solutions"), State Street Brokerage Services, Inc. ("SSBSI"), the State
Street Retirement Investment Services Division ("RIS"), (collectively the
"Agents"), as well as other non-related party service providers. For these
services, the Fund pays .13%, .13%, and .13%, respectively, based upon the
average daily value of all Fund shares held by or for customers of these
Agents. The Funds were charged shareholder servicing expenses by
Solutions, SSBSI and RIS as follows:
<TABLE>
<CAPTION>
State Street
State Street Retirement
State Street Brokerage Investment
Solutions Services, Inc. Services Division
--------- -------------- -----------------
<S> <C> <C> <C>
Income and Growth Fund $22,345 $ 8,818 $ 4,698
Balanced Fund 78,852 2,575 48,715
Growth Fund 75,113 1,887 6,317
</TABLE>
Board of Trustees: Through May 31, 1999, the Investment Company paid each
Trustee not affiliated with the Investment Company a retainer of $48,000
annually, $1,500 for each board meeting attended, an additional $1,500 for
attending the annual audit committee meeting, and reimbursement for
out-of-pocket expenses. As of June 1, 1999, each Trustee receives $2,500
for each board meeting attended, an additional $2,500 for attending the
annual audit committee meeting and $2,500 for the valuation committee fee
in addition to the $48,000 annual retainer. These expenses are allocated
among all of the Funds based upon their relative net assets.
Accrued fees payable to affiliates and trustees as of August 31, 1999 were
as follows:
Income and Balanced Growth
Growth Fund Fund Fund
----------- ---- ----
Custodian fees $ 4,233 $ 7,796 $14,567
Distribution fees 7,477 44,140 25,417
Shareholder servicing fees 3,053 11,287 14,449
Transfer agent fees 204 68 4,109
------- ------- -------
$14,967 $63,291 $58,542
======= ======= =======
Beneficial interest: In the Income and Growth Fund, as of August 31, 1999,
three shareholders (two of which were also affiliates of the Investment
Company) were record owners of approximately 65%, 18% and 16%,
respectively, of the total outstanding shares of the Fund. In the Balanced
Fund, as of August 31, 1999, two shareholders (who were also affiliates of
the Investment Company) were record owners of approximately 60% and 38%,
respectively, of the total outstanding shares of the Fund. In the Growth
Fund, as of August 31, 1999, one shareholder (who was also an affiliate of
the Investment Company) was a record owner of approximately 88% of the
total outstanding shares of the Fund.
34 Annual Report
<PAGE>
SSgA
Life Solutions Funds
Notes to Financial Statements, continued
August 31, 1999
Transactions with Affiliated Companies: An affiliated company is a company
in which a Fund has ownership of at least 5% of voting securities.
Transactions during the period with Underlying Funds which are or were
affiliates are as follows:
<TABLE>
<CAPTION>
Dividend and
Distribution
Affiliate Purchase Cost Sales Cost Income
----------------------------------- ----------- ----------- -----------
<S> <C> <C> <C>
Income and Growth Fund
SSgA Aggressive Equity Fund $ 469,759 $ 284,241 $ --
SSgA Bond Market Fund 14,469,926 7,039,299 926,559
----------- ----------- -----------
$14,939,685 $ 7,323,540 $ 926,559
=========== =========== ===========
Balanced Fund
SSgA Aggressive Equity Fund $ 2,673,603 $ 621,397 $ --
SSgA Active International Fund 12,122,116 5,491,489 1,333,748
SSgA Bond Market Fund 37,228,131 8,088,623 2,292,857
SSgA Intermediate Fund 3,951,733 7,204,525 475,874
SSgA High Yield Bond Fund 4,547,488 20,546 68,033
----------- ----------- -----------
$60,523,071 $21,426,580 $ 4,170,512
=========== =========== ===========
Growth Fund
SSgA Aggressive Equity Fund $ 2,507,808 $ 222,192 $ --
SSgA Active International Fund 11,505,670 2,871,021 1,067,164
----------- ----------- -----------
$14,013,478 $ 3,093,213 $ 1,067,164
=========== =========== ===========
</TABLE>
The values of the above Underlying Funds are shown in the accompanying
Statements of Net Assets.
5. Fund Share Transactions (amounts in thousands)
<TABLE>
<CAPTION>
Fiscal Years Ended August 31,
-----------------------------------------------------
1999 1998
----------------------- -----------------------
Shares Dollars Shares Dollars
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Income and Growth Fund
Proceeds from shares sold ...................... 866 $ 10,846 1,006 $ 13,056
Proceeds from reinvestment of distributions .... 172 2,169 69 858
Payments for shares redeemed ................... (926) (11,621) (278) (3,644)
-------- -------- -------- --------
Total net increase (decrease) .................. 112 $ 1,394 797 $ 10,270
======== ======== ======== ========
Balanced Fund
Proceeds from shares sold ...................... 992 $ 12,420 4,038 $ 54,512
Proceeds from reinvestment of distributions .... 737 9,647 306 3,963
Payments for shares redeemed ................... (1,560) (20,124) (697) (9,808)
-------- -------- -------- --------
Total net increase (decrease) .................. 169 $ 1,943 3,647 $ 48,667
======== ======== ======== ========
</TABLE>
Annual Report 35
<PAGE>
SSgA
Life Solutions Funds
Notes to Financial Statements, continued
August 31, 1999
<TABLE>
<CAPTION>
Fiscal Years Ended August 31,
-----------------------------------------------------
1999 1998
----------------------- -----------------------
Shares Dollars Shares Dollars
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Growth Fund
Proceeds from shares sold ........................ 776 $ 10,200 1,118 $ 16,120
Proceeds from reinvestment of distributions ...... 465 6,267 323 4,287
Payments for shares redeemed ..................... (898) (12,097) (287) (4,212)
------ -------- ----- --------
Total net increase (decrease) .................... 343 $ 4,370 1,154 $ 16,195
====== ======== ===== ========
</TABLE>
36 Annual Report
<PAGE>
SSgA
Life Solutions Funds
Tax Information
August 31, 1999 (Unaudited)
The Funds paid distributions of $940,461, $4,977,011 and $3,846,784 for
Income and Growth Fund, Balanced Fund and Growth Fund, respectively, from
net long-term capital gains during its taxable year ended August 31, 1999.
Please consult a tax advisor for questions about federal or state income
tax laws.
Annual Report 37
<PAGE>
SSgA Life Solutions Funds
One International Place, 27th Floor
Boston, Massachusetts 02110
(800) 997-7327
- --------------------------------------------------------------------------------
Trustees
Lynn L. Anderson, Chairman
William L. Marshall
Steven J. Mastrovich
Patrick J. Riley
Richard D. Shirk
Bruce D. Taber
Henry W. Todd
Officers
Lynn L. Anderson, President, Treasurer and CEO
Mark E. Swanson, Assistant Secretary, Assistant
Treasurer and Principal Accounting Officer
J. David Griswold, Vice President and Secretary
Deedra S. Walkey, Assistant Secretary
Rick J. Chase, Assistant Secretary
Carla L. Anderson, Assistant Secretary
Investment Adviser
State Street Bank and Trust Company
225 Franklin Street
Boston, Massachusetts 02110
Custodian, Transfer Agent and
Office of Shareholder Inquiries
State Street Bank and Trust Company
1776 Heritage Drive
North Quincy, Massachusetts 02171
(800) 647-7327
Distributor
Russell Fund Distributors, Inc.
One International Place, 27th Floor
Boston, Massachusetts 02110
(800) 997-7327
Administrator
Frank Russell Investment Management Company
909 A Street
Tacoma, Washington 98402
Legal Counsel
Goodwin, Procter & Hoar LLP
Exchange Place
Boston, Massachusetts 02109
Independent Accountants
PricewaterhouseCoopers LLP
160 Federal Street
Boston, Massachusetts 02110
38 Annual Report
<PAGE>
SSgA(R) Funds
Money Market Fund
Annual Report
August 31, 1999
Table of Contents
Page
Chairman's Letter........................................... 4
Portfolio Management Discussion and Analysis................ 6
Report of Independent Accountants........................... 8
Financial Statements........................................ 9
Financial Highlights........................................ 19
Notes to Financial Statements............................... 20
Fund Management and Service Providers....................... 24
"SSgA(R)" is a registered trademark of State Street Corporation and is licensed
for use by the SSgA Funds.
This report is prepared from the books and records of the Fund and it is
submitted for the general information of shareholders. This information is for
distribution to prospective investors only when preceded or accompanied by a
SSgA Funds Prospectus containing more complete information concerning the
investment objective and operations of the Fund, charges and expenses. The
Prospectus should be read carefully before an investment is made.
Performance is historical and assumes reinvestment of all dividends and capital
gains. Investment return and principal value will fluctuate so that an
investor's shares, when redeemed, may be worth more or less than when purchased.
Past performance is not indicative of future results. An investment in a money
market fund is neither insured nor guaranteed by the US government. There can be
no assurance that a money market fund will be able to maintain a stable net
asset value of $1.00 per share. Russell Fund Distributors, Inc., is the
distributor of the SSgA Funds.
<PAGE>
SSgA Money Market Fund
- --------------------------------------------------------------------------------
Letter From the Chairman of State Street Global Advisors
- --------------------------------------------------------------------------------
Dear Shareholders,
It is my pleasure to provide you with the SSgA Funds annual report for the
fiscal year ended August 31, 1999. The SSgA Fund family has grown to include
twenty-three portfolios covering a broad range of investment strategies. The
enclosed information provides an overview of the investment process for the SSgA
Money Market Fund. This overview contains market updates, performance, and
financial information for the Fund. I hope you will find this information a
useful reference as you review your investment strategy.
During the past fiscal year, the SSgA Fund family has opened two new Funds. The
names and investment objectives for these funds are as follows:
The SSgA Aggressive Equity Fund seeks to maximize total return through investing
in US equity securities that are undervalued relative to their growth potential
as measured by SSgA's proprietary models.
The SSgA IAM Shares Fund seeks to maximize total return by investing primarily
in equity securities of companies that have entered into collective bargaining
agreements with the International Association of Machinists and Aerospace
Workers or affiliated labor unions.
Additionally, three SSgA Funds achieved a five-year track record during the 1999
fiscal year. These funds include the two institutional money market funds, SSgA
US Treasury and SSgA Prime Money Market Funds and the SSgA Emerging Markets
Fund. We are proud of our long-term record and look forward to having additional
funds complete their five-year anniversary.
In today's complex global marketplace, we are continually researching new
products and ideas to introduce to our fund family. Here at SSgA, we are
committed to providing a wide range of competitive investment vehicles to
fulfill your investment needs.
I would like to thank you for choosing the SSgA Funds.
Sincerely,
/s/ Nicholas A. Lopardo
Nicholas A. Lopardo
State Street Global Advisors
Chairman and Chief Executive Officer
4 Annual Report
<PAGE>
SSgA Money Market Fund
- --------------------------------------------------------------------------------
Management of the Funds
- --------------------------------------------------------------------------------
[PHOTO]
Nicholas A. Lopardo
Chairman and Chief Executive Officer
A Team Approach to Investment Management
Our investment strategies are the product of the combined experience of our
professional staff. Portfolio Managers work together to develop and enhance the
techniques that drive our investment processes. As a result, the portfolios we
manage benefit from the knowledge of the entire team.
Ms. Lisa Hatfield, Principal, has been the portfolio manager primarily
responsible for investment decisions regarding the SSgA Money Market Fund since
January 1998. Ms. Hatfield has been with State Street since 1986 and has managed
several money market funds since 1987. She received a BS from Suffolk
University. There are ten other portfolio managers working with Ms. Hatfield.
Annual Report 5
<PAGE>
SSgA Money Market Fund
- --------------------------------------------------------------------------------
Portfolio Management Discussion and Analysis
- --------------------------------------------------------------------------------
Objective: Maximize current income while preserving capital and liquidity.
Invests in: High quality money market instruments including certificates of
deposit, time deposits, bankers acceptances, commercial paper, corporate
medium-term notes, US Government Treasury and Agency notes, and repurchase
agreements.
Strategy: Fund Managers base their decisions on the relative attractiveness of
different money market investments which can vary depending on the general level
of interest rates as well as supply/demand imbalances in the market.
- --------------------------------------------------------------------------------
GROWTH OF A $10,000 INVESTMENT
<TABLE>
<CAPTION>
Dates Money Market Saloman Smith Barney 3-Month T-Bill Index
<S> <C> <C>
* $10,000 $10,000
1990 $10,848 $10,815
1991 $11,616 $11,523
1992 $12,160 $12,014
1993 $12,585 $12,383
1994 $12,975 $12,824
1995 $13,691 $13,539
1996 $14,425 $14,263
1997 $15,187 $15,012
1998 $16,009 $15,796
1999 $16,787 $16,530
</TABLE>
================================================================================
Performance Review
The Fund had a total return of 4.86% for the fiscal year ended August 31, 1999.
This compares favorably to the return of the benchmark Salomon Smith Barney
3-Month Treasury Bill Index, which gained 4.65% for the same period. The Fund's
performance is net of operating expenses, whereas Index results do not include
expenses of any kind. The Salomon Smith Barney 3-Month Treasury Bill Index was
chosen as a standard, well known representation of money market rates.
Market and Portfolio Highlights
The year began with the Russian government defaulting on portions of its debt,
and international investors losing billions of dollars as a result. Russia's
meltdown sent tremors through Latin American economies and posed a significant
threat to Mexico, a major US trading partner. This turmoil caused a huge "flight
to quality", where US treasuries were deemed one of the only safe investments.
As treasuries rallied and credit spreads widened, it became apparent that market
participants, as well as the Fed, feared a global financial meltdown.
- --------------------------------------------------------------------------------
SSgA Money Market Fund
- --------------------------------------------------------------------------------
Period Ended Growth of Total
08/31/99 $10,000 Return
- -------------- ------------ -------
1 Year $ 10,486 4.86%
5 Years $ 12,938 5.29+
10 Years $ 16,787 5.32+
- --------------------------------------------------------------------------------
Salomon Smith Barney 3-Month Treasury Bill Index
- --------------------------------------------------------------------------------
Period Ended Growth of Total
08/31/99 $10,000 Return
- -------------- ------------ -------
1 Year $ 10,465 4.65%
5 Years $ 12,890 5.21+
10 Years $ 16,531 5.16+
See related Notes on following page.
6 Annual Report
<PAGE>
SSgA Intermediate Fund
- --------------------------------------------------------------------------------
Portfolio Management Discussion and Analysis
- --------------------------------------------------------------------------------
On September 29, 1998, the Federal Reserve Open Market Committee (FOMC) voted to
cut the Federal Funds rate by 25 basis points to 5.25%, its lowest level since
January 1996. This action was quickly followed by two more 25 basis point
easings, with the last move occurring on November 17th. The US economy remained
robust, with both low employment and low inflation, but lower rates were needed
to head off the potentially serious threat of lack of liquidity in the markets
and ultimately to continued US economic growth. The last Fed rate cut was an
insurance policy, making it clear that the world's largest Central Bank was
willing to help minimize further market contagion.
The actions by the Federal Reserve were successful in bolstering liquidity and
preserving growth. The wealth effect from real estate and stock market gains,
coupled with a historically low unemployment rate, drove confidence and spending
to record highs. GDP growth has averaged over 3% for the past two quarters,
while inflation indicators have remained markedly well behaved. Recently,
concerns of increasing asset prices, slowing productivity gains, and recovering
foreign economies across the Pacific-Rim raised concerns with the Federal
Reserve. On June 30, 1999, they opted to raise the Federal Funds rate from 4.75%
to 5.00%, and again on August 24th to 5.25%. These moves by the FOMC retract
most of last fall's easings and leaves the door open to another tightening, if
required, in the final quarter of 1999.
In the last year, the SSgA Money Market Fund was managed consistently with its
objective of providing safety of principal and liquidity by investing in high
quality investments and providing competitive returns. The Fund's net assets
have nearly doubled in size, increasing by 84% over the past year to $10.1
billion at August 31, 1999. New cash was invested in a combination of fixed and
floating rate securities, but due to the volatile nature of cash flows, a larger
than average 25%-35% was rolled in overnight maturities. This large overnight
position has served to benefit the Fund, as overnight rates have been increasing
due to tighter monetary policy. The Fund also looked to increase exposure in
one- to three-month Asset- Backed commercial paper due to an exceptionally high
yield advantage over bank and finance commercial paper. Over the past year,
mounting pressures from continuing domestic strength and recovering foreign
economies created a very steep short yield curve due to the markets perception
of Fed tightening. The Fund took advantage of higher rates extending in one-year
securities on market weakness. Given that the Fed may increase interest rates
throughout 1999, the Manager also looked to increase exposure in floating rate
securities that offer protection against rising interest rates. The Fund's
investment strategy concentrated primarily on indices such as one- and
three-month LIBOR (London Interbank Offering Rate), with a small allocation
based on Fed Funds and Prime rates. The average maturity of the Fund ranged from
35 to 70 days over the last year, ending at 57 days on August 31, 1999.
- --------------------------------------------------------
Top Five Holdings (by investment type,
as a percent of Total Investments August 31, 1999
- --------------------------------------------------------
Corporate Bonds and Notes 26.1%
Domestic Commercial Paper 16.0
Repurchase Agreements 15.9
Time Deposits 14.9
Yankee Certificates of Deposit 9.2
- --------------------------------------------------------
---------------------
Notes: The following notes relate to the Growth of $10,000 graph and table on
the preceding page.
* Assumes initial investment on September 1, 1988.
** Equal dollar amounts of 3-month Treasury bills are purchased at the
beginning of each of three consecutive months. As each bill matures, all
proceeds are rolled over or reinvested in a new 3-month bill. The income
used to calculate the monthly return is derived by subtracting the
original amount invested from the maturity value. The yield curve average
is the basis for calculating the return on the Index. The Index is
rebalanced monthly by market capitalization.
+ Annualized.
Performance is historical and assumes reinvestment of all dividends and capital
gains. Investment return and principal value will fluctuate so that an
investor's shares, when redeemed, may be worth more or less than when purchased.
Past performance is not indicative of future results.
An investment in a money market fund is neither insured nor guaranteed by the US
Government. There can be no assurance that a money market fund will be able to
maintain a stable net asset value of $1.00 per share.
Annual Report 7
<PAGE>
Report of Independent Accountants
To the Shareholders and Board of Trustees of the SSgA Funds:
In our opinion, the accompanying statement of assets and liabilities and
statement of net assets, and the related statements of operations and of changes
in net assets and the financial highlights present fairly, in all material
respects, the financial position of SSgA Money Market Fund (the "Fund") at
August 31, 1999, the results of its operations for the fiscal year then ended
and the changes in its net assets for each of the two fiscal years in the period
then ended, and the financial highlights for each of the five fiscal years in
the period then ended, in conformity with generally accepted accounting
principles. These financial statements and financial highlights (hereafter
referred to as "financial statements") are the responsibility of the Fund's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these financial
statements in accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of securities at August 31, 1999 by correspondence with the
custodian and brokers, provide a reasonable basis for the opinion expressed
above.
Boston, Massachusetts
October 11, 1999
/s/ PricewaterhouseCoopers LLP
8 Annual Report
<PAGE>
SSgA
Money Market Fund
Statement of Net Assets
August 31, 1999
<TABLE>
<CAPTION>
Principal
Amount Date Value
(000) Rate of (000)
$ % Maturity $
--------- ---- -------- -------
<S> <C> <C> <C> <C>
Corporate Bonds and Notes - 26.5%
Abbey National Treasury Services PLC ............... 25,000 5.185 05/12/00 24,986
Abbey National Treasury Services PLC (MTN) ......... 55,000 5.075 01/13/00 54,995
Abbey National Treasury Services PLC (MTN) ......... 50,000 5.130 05/04/00 49,961
Associates Corp. NA (a) ............................ 40,000 5.168 03/20/00 39,983
AT&T Corp. (a) ..................................... 75,000 5.270 07/13/00 74,974
AT&T Corp. (a) ..................................... 100,000 5.404 08/07/00 100,000
Bank of America NA (a) ............................. 50,000 5.500 01/31/00 49,993
Bank of New York (MTN) ............................. 35,000 5.345 05/24/00 34,987
Bank of New York (MTN)(a) .......................... 25,000 5.400 05/15/00 24,991
Bank One Corp. (MTN)(a) ............................ 25,000 5.473 06/01/00 25,000
Barclays Bank PLC (a) .............................. 50,000 5.500 01/24/00 49,990
Barclays Bank PLC (a) .............................. 50,000 5.390 05/12/00 49,980
Branch Banking & Trust (a) ......................... 48,000 5.540 03/08/00 47,985
Citigroup, Inc. (MTN)(a) ........................... 35,000 5.383 05/15/00 34,984
Commercial Bank (a) ................................ 50,000 5.164 02/08/00 49,999
Commercial Bank (a) ................................ 45,000 5.129 03/07/00 44,989
Commercial Bank (a) ................................ 50,000 5.144 05/11/00 49,979
Diago Capital PLC (a) .............................. 55,000 5.319 08/10/00 54,959
du Pont (E.I.) de Nemours & Co. .................... 25,000 9.150 04/15/00 25,592
du Pont (E.I.) de Nemours & Co. (MTN) .............. 25,000 5.235 03/03/00 24,993
Emerson Electric Co. ............................... 25,000 5.125 03/17/00 24,988
First National Bank Chicago ........................ 30,000 6.000 08/11/00 29,986
First Union National Bank .......................... 60,000 5.300 03/01/00 60,000
First Union National Bank (a) ...................... 75,000 5.249 03/10/00 75,000
First Union National Bank (a) ...................... 27,115 5.399 04/20/00 27,132
First Union National Bank (a) ...................... 40,000 5.311 07/28/00 40,000
First Union National Bank (a) ...................... 50,000 5.573 08/31/00 50,000
Ford Motor Credit Co. (MTN)(a) ..................... 100,000 5.450 05/05/00 100,000
General American Life Insurance (a)(c) ............. 100,000 5.280 05/18/00 100,000
General Electric Capital Corp. (MTN)(a) ............ 25,000 5.049 09/09/99 25,000
General Electric Capital Corp. (MTN)(a) ............ 25,000 5.293 05/03/00 25,000
General Electric Capital Corp. (MTN)(a) ............ 40,000 5.390 05/12/00 40,000
GTE Corp. (a) ...................................... 75,000 4.985 06/02/00 74,938
Harris Trust & Savings (MTN)(a) .................... 75,000 5.405 06/01/00 74,970
Household Finance Corp. (MTN) ...................... 75,000 5.678 07/07/00 74,969
</TABLE>
Annual Report 9
<PAGE>
SSgA
Money Market Fund
Statement of Net Assets, continued
August 31, 1999
<TABLE>
<CAPTION>
Principal
Amount Date Value
(000) Rate of (000)
$ % Maturity $
--------- ----- -------- -------
<S> <C> <C> <C> <C>
Household Finance Corp. (MTN)(a) ................... 50,000 5.040 04/17/00 49,981
IBM Corp. (MTN)(a) ................................. 50,000 5.274 10/21/99 49,996
IBM Corp. (MTN)(a) ................................. 20,000 5.211 07/28/00 19,982
IBM Credit Corp. (MTN)(a) .......................... 20,000 5.274 10/22/99 19,998
Key Bank N.A. (a) .................................. 75,000 5.339 10/21/99 75,000
Key Bank N.A. (a) .................................. 50,000 5.325 04/20/00 50,000
Key Bank N.A. (a) .................................. 25,000 5.328 04/20/00 25,000
Key Bank N.A. (MTN) ................................ 50,000 5.670 07/17/00 49,979
National City Bank, Ohio ........................... 25,000 5.200 05/15/00 24,992
Nations Bank N.A ................................... 75,000 5.000 01/05/00 74,995
Norwest Corp. (MTN) ................................ 110,000 4.900 10/06/99 109,996
PNC Bank, Pittsburgh (a) ........................... 50,000 5.289 01/31/00 49,992
STEERS-A37 (a) ..................................... 66,647 5.339 10/25/11 66,647
TIERS TR (a) ....................................... 50,000 5.299 10/15/03 49,959
U.S. Bankcorp (MTN)(a) ............................. 24,000 5.199 10/07/99 23,999
Wells Fargo & Company (MTN)(a) ..................... 60,000 5.355 06/13/00 59,973
Westpac Banking Corp. .............................. 25,000 5.825 08/02/00 24,989
Xerox Capital Group PLC (a) ........................ 50,000 5.413 08/18/00 49,969
Xerox Corp. (MTN) .................................. 20,000 5.635 07/14/00 19,986
Xerox Credit Corp. (MTN) ........................... 40,000 5.113 03/21/00 39,977
---------
Total Corporate Bonds and Notes (cost $2,670,713) .................................... 2,670,713
---------
Domestic Certificates of Deposit - 4.1%
Bank Boston N.A .................................... 25,000 5.080 09/14/99 25,000
Bank of New York ................................... 35,000 5.120 09/16/99 34,925
Bank of New York ................................... 25,000 5.568 02/04/00 24,397
Fifth Third Bancorp ................................ 25,000 5.150 09/30/99 25,000
First Tennessee Bank N.A ........................... 35,000 5.310 09/24/99 35,000
First Union National Bank (a) ...................... 85,000 5.498 11/17/99 85,000
Fleet National Bank (a) ............................ 25,000 5.339 10/22/99 25,000
Fleet National Bank (a) ............................ 25,000 5.364 11/04/99 24,998
Key Bank N.A. (a) .................................. 100,000 5.450 07/14/00 99,945
Wachovia Bank N.A. (a) ............................. 35,000 5.305 10/25/99 34,999
---------
Total Domestic Certificates of Deposit (cost $414,264) ............................... 414,264
---------
</TABLE>
10 Annual Report
<PAGE>
SSgA
Money Market Fund
Statement of Net Assets, continued
August 31, 1999
<TABLE>
<CAPTION>
Principal
Amount Date Value
(000) Rate of (000)
$ % Maturity $
--------- ----- -------- -------
<S> <C> <C> <C> <C>
Eurodollar Certificates of Deposit - 1.9%
Abbey National PLC ................................. 45,000 5.050 11/12/99 45,000
Bank of Montreal ................................... 15,000 5.190 03/28/00 14,996
Barclays Bank ...................................... 25,000 5.040 01/12/00 25,000
Barclays Bank ...................................... 30,000 5.800 07/28/00 30,000
Halifax PLC ........................................ 35,000 5.300 12/01/99 35,000
KBC Bank Nevada .................................... 30,000 5.180 09/20/99 30,000
Westpac Banking .................................... 10,000 5.190 03/27/00 9,997
---------
Total Eurodollar Certificates of Deposit (cost $189,993) ............................ 189,993
---------
Eurodollar Time Deposits - 4.6%
Bayerisch Hypo Verbk London ........................ 300,000 5.593 09/01/99 300,000
Credit Communal Debelgique ......................... 64,500 5.687 09/01/99 64,500
Den Denske Bank .................................... 100,000 5.455 11/23/99 100,000
---------
Total Eurodollar Time Deposits (cost $464,500) ...................................... 464,500
---------
Foreign Commercial Paper - 4.3%
ANZ Delaware ....................................... 75,000 5.360 12/02/99 73,973
Commonwealth Bank Australia ........................ 25,000 4.885 09/03/99 24,993
Cregem North American, Inc. ........................ 70,000 5.330 12/20/99 68,860
Den Denske Corp. ................................... 20,000 4.885 09/01/99 20,000
Nordbanken North America, Inc. ..................... 40,000 5.180 10/27/99 39,678
UBS Finance Deleware, Inc. ......................... 50,000 5.320 12/20/99 49,187
Westpac Capital Corp. .............................. 43,000 4.820 10/05/99 42,804
Woolwich ........................................... 75,000 5.340 10/25/99 74,399
Woolwich ........................................... 40,000 5.230 03/06/00 38,913
---------
Total Foreign Commercial Paper (cost $432,807) ....................................... 432,807
---------
Domestic Commercial Paper - 16.2%
Asset Securitization Cooperative Corp. ............. 30,000 5.150 10/21/99 29,785
AT&T ............................................... 50,000 5.450 09/03/99 49,985
Delaware Funding Corp. ............................. 29,000 5.130 09/21/99 28,917
Delaware Funding Corp. ............................. 50,152 5.140 09/24/99 49,987
Diago Capital PLC .................................. 55,000 5.550 02/11/00 53,618
</TABLE>
Annual Report 11
<PAGE>
SSgA
Money Market Fund
Statement of Net Assets, continued
August 31, 1999
<TABLE>
<CAPTION>
Principal
Amount Date Value
(000) Rate of (000)
$ % Maturity $
--------- ----- -------- -------
<S> <C> <C> <C> <C>
Edison Asset Securitization ........................ 27,000 5.190 10/15/99 26,829
Edison Asset Securitization ........................ 30,000 5.380 11/22/99 29,632
Falcon Asset Securitization ........................ 60,000 5.140 09/02/99 59,991
Falcon Asset Securitization ........................ 31,875 5.140 09/09/99 31,839
Falcon Asset Securitization ........................ 15,137 5.150 09/13/99 15,111
Falcon Asset Securitization ........................ 31,951 5.200 09/14/99 31,891
Falcon Asset Securitization ........................ 30,000 5.180 09/16/99 29,935
Falcon Asset Securitization ........................ 35,000 5.280 09/17/99 34,918
Falcon Asset Securitization ........................ 49,300 5.280 09/20/99 49,163
Falcon Asset Securitization ........................ 35,000 5.300 09/21/99 34,897
Falcon Asset Securitization ........................ 44,285 5.300 09/24/99 44,135
Falcon Asset Securitization ........................ 25,164 5.300 09/27/99 25,068
Falcon Asset Securitization ........................ 54,000 5.370 11/04/99 53,484
Falcon Asset Securitization ........................ 32,480 5.380 11/09/99 32,145
GE Capital International Funding ................... 40,000 5.130 09/20/99 39,892
GE Capital International Funding ................... 120,000 5.300 09/23/99 119,611
GE Capital International Funding ................... 50,000 5.430 02/23/00 48,680
GE Capital International Funding ................... 35,000 5.720 02/23/00 34,027
General Electric Capital Corp. ..................... 30,000 5.170 10/13/99 29,819
Old Line Funding Corp. ............................. 34,677 5.130 09/03/99 34,667
Old Line Funding Corp. ............................. 22,839 5.130 09/07/99 22,819
Old Line Funding Corp. ............................. 30,000 5.180 09/08/99 29,970
Old Line Funding Corp. ............................. 35,000 5.200 09/08/99 34,965
Old Line Funding Corp. ............................. 58,000 5.180 09/09/99 57,933
Old Line Funding Corp. ............................. 67,000 5.200 09/15/99 66,865
Old Line Funding Corp. ............................. 45,110 5.280 09/21/99 44,978
Preferred Receivables Funding Corp. ................ 26,000 5.140 09/09/99 25,970
Preferred Receivables Funding Corp. ................ 45,000 5.130 09/13/99 44,923
Preferred Receivables Funding Corp. ................ 42,000 5.170 10/20/99 41,704
Preferred Receivables Funding Corp. ................ 40,000 5.360 10/27/99 39,666
Preferred Receivables Funding Corp. ................ 53,955 5.390 11/19/99 53,317
Salomon Smith Barney Holdings, Inc. ................ 25,000 5.110 09/10/99 24,968
Thunder Bay Funding Corp. .......................... 25,000 5.180 09/09/99 24,971
Thunder Bay Funding Corp. .......................... 51,896 5.250 09/16/99 51,782
Thunder Bay Funding Corp. .......................... 33,000 5.280 09/17/99 32,923
Wells Fargo & Company .............................. 20,000 5.710 02/16/00 19,467
---------
Total Domestic Commercial Paper (cost $1,635,247) ................................... 1,635,247
---------
</TABLE>
12 Annual Report
<PAGE>
SSgA
Money Market Fund
Statement of Net Assets, continued
August 31, 1999
<TABLE>
<CAPTION>
Principal
Amount Date Value
(000) Rate of (000)
$ % Maturity $
--------- ----- -------- -------
<S> <C> <C> <C> <C>
Time Deposits - 15.1%
Bank of Boston ..................................... 100,000 5.312 09/29/99 100,000
Chase Bank ......................................... 400,000 5.562 09/01/99 400,000
Fifth Third Bancorp ................................ 150,101 5.625 09/01/99 150,101
First National Bank of Chicago ..................... 200,000 5.570 09/01/99 200,000
Harris Trust & Savings ............................. 75,000 5.300 09/30/99 75,000
Marshall Isley Grand Cayman ........................ 300,000 5.593 09/01/99 300,000
National City Bank, Grand Cayman ................... 300,000 5.625 09/01/99 300,000
Total Time Deposits (cost $1,525,101) ................................................ 1,525,101
United States Government Agencies - 3.4%
Federal Farm Credit Bank ........................... 50,925 5.000 05/03/00 50,886
Federal Home Loan Bank ............................. 85,000 5.210 09/22/99 84,742
Federal Home Loan Bank ............................. 57,000 4.900 01/14/00 56,996
Federal Home Loan Bank ............................. 50,000 5.160 03/08/00 49,978
Federal Home Loan Bank (a) ......................... 50,000 5.029 09/08/99 50,000
Federal Home Loan Bank (a) ......................... 25,000 5.370 11/10/99 24,997
Federal Home Loan Bank (a) ......................... 25,000 5.370 08/03/00 24,991
Total United States Government Agencies (cost $342,590) .............................. 342,590
Yankee Certificates of Deposit - 9.3%
ABN AMRO ........................................... 30,000 5.700 07/10/00 29,988
ABN AMRO Bank NV Chicago (a) ....................... 50,000 5.395 05/25/00 49,978
Bank of Nova Scotia ................................ 25,000 5.055 11/12/99 24,999
Bank of Nova Scotia ................................ 25,000 5.000 01/06/00 24,997
Bank of Nova Scotia ................................ 30,000 5.800 02/09/00 30,000
Bank of Nova Scotia ................................ 25,000 5.800 08/02/00 24,989
Bank of Nova Scotia ................................ 30,000 5.880 08/07/00 29,982
Barclays Bank PLC .................................. 40,000 5.230 03/01/00 39,987
Canadian Imperial Bank ............................. 50,000 5.025 01/27/00 49,993
Canadian Imperial Bank ............................. 40,000 5.110 02/22/00 39,994
Canadian Imperial Bank ............................. 25,000 5.120 02/23/00 24,995
Canadian Imperial Bank ............................. 49,475 5.080 04/12/00 49,455
Canadian Imperial Bank (a) ......................... 65,000 5.185 04/07/00 64,972
National Westminster Bank PLC ...................... 50,000 4.980 01/07/00 49,993
National Westminster Bank PLC ...................... 25,000 5.620 06/19/00 24,993
Royal Bank of Canada ............................... 25,000 5.700 07/03/00 24,990
</TABLE>
Annual Report 13
<PAGE>
SSgA
Money Market Fund
Statement of Net Assets, continued
August 31, 1999
<TABLE>
<CAPTION>
Principal
Amount Date Value
(000) Rate of (000)
$ % Maturity $
--------- ----- -------- -------
<S> <C> <C> <C> <C>
Royal Bank of Canada (a) ........................... 50,000 5.600 02/24/00 50,000
Svenska Handelsbanken .............................. 40,000 5.065 02/08/00 39,994
Svenska Handelsbanken .............................. 15,000 5.055 02/10/00 14,998
Svenska Handelsbanken .............................. 19,000 5.210 03/01/00 18,996
Svenska Handelsbanken .............................. 25,000 5.285 03/01/00 24,993
Svenska Handelsbanken .............................. 35,000 5.155 04/28/00 34,988
Svenska Handelsbanken .............................. 20,000 5.470 06/01/00 19,996
Toronto Dominion ................................... 35,000 4.980 01/07/00 34,995
Toronto Dominion ................................... 20,000 5.150 02/28/00 19,996
UBS AG Stamford Branche ............................ 25,000 5.550 06/05/00 24,991
UBS AG Stamford Branche ............................ 25,000 5.670 07/07/00 24,990
Westpac Banking .................................... 50,000 5.010 02/04/00 49,994
---------
Total Yankee Certificates of Deposit (cost $943,236) ................................. 943,236
---------
Total Investments - 85.4% (amortized cost $8,618,451) ................................ 8,618,451
---------
Repurchase Agreements - 16.2%
Agreement with CIBC/WOOD Gundy, Inc. of $30,000 acquired August 31, 1999 at
5.400% to be repurchased at $30,004 on September 1, 1999, collateralized by:
$30,243 United States Treasury Note, valued at $30,621 ........................... 30,000
Agreement with Deutsche Bank of $1,000,000
acquired August 31, 1999 at 5.500% to be repurchased at $1,000,153
on September 1, 1999, collateralized by:
various United States Treasury Obligations, valued at $1,020,991 ................ 1,000,000
Agreement with Lehman Brothers of $600,000
acquired August 31, 1999 at 5.590% to be repurchased at $600,093
on September 1, 1999, collateralized by:
various United States Treasury Obligations, valued at $612,059 ................... 600,000
---------
Total Repurchase Agreements (identified cost $1,630,000) ............................. 1,630,000
---------
</TABLE>
14 Annual Report
<PAGE>
SSgA
Money Market Fund
Statement of Net Assets, continued
August 31, 1999
<TABLE>
<CAPTION>
Value
(000)
$
----------
<S> <C>
Total Investments and Repurchase Agreements - 101.6% (cost $10,248,451)(b) ......... 10,248,451
Other Assets and Liabilities, Net - (1.6%) ......................................... (164,168)
----------
Net Assets - 100.0% ................................................................ 10,084,283
==========
</TABLE>
(a) Adjustable or floating rate security.
(b) The identified cost for federal income tax purpose is the same as shown
above.
(c) On September 29, 1999, the Board of Trustees and Adviser have agreed to
exchange the General American security subject to funding agreement
contracts for MetLife Funding Agreement Contracts, which will be liquidated
on October 1, 1999.
Abbreviations:
MTN - Medium Term Note
See the accompanying notes which are an integral part of the financial
statements.
Annual Report 15
<PAGE>
SSgA
Money Market Fund
Statement of Asset and Liabilities
Amounts in thousands (except per share amount) August 31, 1999
<TABLE>
<S> <C> <C>
Assets
Investments at amortized cost which approximates market (Note 2) ........... $ 8,618,451
Repurchase agreements (identified cost $1,630,000) ......................... 1,630,000
Interest receivable ........................................................ 56,332
------------
Total Assets ......................................................... 10,304,783
Liabilities
Payables:
Investments purchased .................................... $ 173,973
Dividends ................................................ 40,790
Accrued fees to affiliates ............................... 4,750
Other accrued expenses ................................... 987
------------
Total Liabilities .................................................... 220,500
------------
Net Assets ................................................................. $ 10,084,283
============
Net Assets Consist of:
Accumulated net realized gain (loss) ....................................... $ (252)
Shares of beneficial interest .............................................. 10,085
Additional paid-in capital ................................................. 10,074,450
------------
Net Assets ................................................................. $ 10,084,283
============
Net Asset Value, offering and redemption price per share:
($10,084,283,265 divided by 10,084,535,141 shares of $.001 par value
shares of beneficial interest outstanding) ........................... $ 1.00
============
</TABLE>
See the accompanying notes which are an integral part of the financial
statements.
16 Annual Report
<PAGE>
SSgA
Money Market Fund
Statement of Operations
Amounts in thousands For the Fiscal Year Ended August 31, 1999
<TABLE>
<S> <C> <C>
Investment Income
Interest ....................................................................... $ 388,539
Expenses
Advisory fees .................................................... $ 18,917
Administrative fees .............................................. 2,350
Custodian fees ................................................... 1,234
Distribution fees ................................................ 2,771
Professional fees ................................................ 44
Registration fees ................................................ 1,006
Shareholder servicing fees ....................................... 2,836
Transfer agent fees .............................................. 458
Trustees' fees ................................................... 149
Miscellaneous .................................................... 142
------------
Total Expenses .............................................................. 29,907
------------
Net investment income ............................................................. 358,632
Net Realized Gain (Loss)
Net realized gain (loss) on investments ........................................... 1,666
------------
Net increase in net assets resulting from operations .............................. $ 360,298
============
</TABLE>
See the accompanying notes which are an integral part of the financial
statements.
Annual Report 17
<PAGE>
SSgA
Money Market Fund
Statement of Changes in Net Assets
Amounts in thousands For the Fiscal Years Ended August 31,
<TABLE>
<CAPTION>
1999 1998
------------ ------------
<S> <C> <C>
Increase (Decrease) in Net Assets
Operations
Net investment income ............................................ $ 358,632 $ 268,881
Net realized gain (loss) ......................................... 1,666 796
------------ ------------
Net increase in net assets resulting from operations .......... 360,298 269,677
Distributions
From net investment income ....................................... (358,632) (268,881)
------------ ------------
Share Transactions
Net increase (decrease) in net assets from share transactions .... 4,605,291 1,198,365
------------ ------------
Total Net Increase (Decrease) in Net Assets ......................... 4,606,957 1,199,161
Net Assets
Beginning of period .............................................. 5,477,326 4,278,165
------------ ------------
End of period .................................................... $ 10,084,283 $ 5,477,326
============ ============
</TABLE>
See the accompanying notes which are an integral part of the financial
statements.
18 Annual Report
<PAGE>
SSgA
Intermediate Fund
Financial Highlights
The following table includes selected data for a share outstanding throughout
each period and other performance information derived from the financial
statements.
<TABLE>
<CAPTION>
Fiscal Years Ended August 31,
-----------------------------------------------------------
1999 1998 1997 1996 1995
----------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period .............. $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000
----------- ---------- ---------- ---------- ----------
Income From Operations
Net investment income .......................... .0476 .0528 .0516 .0524 .0538
----------- ---------- ---------- ---------- ----------
Distributions
From net investment income ..................... (.0476) (.0528) (.0516) (.0524) (.0538)
----------- ---------- ---------- ---------- ----------
Net Asset Value, End of Period .................... $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000
=========== ========== ========== ========== ==========
Total Return (%) .................................. 4.86 5.41 5.28 5.36 5.52
Ratios/Supplemental Data:
Net Assets, end of period ($ in thousands) ..... 10,084,283 5,477,326 4,278,165 3,475,409 2,752,895
Ratios to average net assets (%):
Operating expenses ........................... .40 .41 .39 .39 .39
Net investment income ........................ 4.74 5.28 5.17 5.20 5.37
</TABLE>
Annual Report 19
<PAGE>
SSgA
Money Market Fund
Notes to Financial Statements
August 31, 1999
1. Organization
The SSgA Funds (the "Investment Company") is a series mutual fund,
currently comprised of 23 investment portfolios which are in operation as
of August 31, 1999. These financial statements report on one portfolio,
the SSgA Money Market Fund (the "Fund"). The Investment Company is a
registered and diversified open-end investment company, as defined in the
Investment Company Act of 1940, as amended (the "1940 Act"), that was
organized as a Massachusetts business trust on October 3, 1987 and
operates under a First Amended and Restated Master Trust Agreement, dated
October 13, 1993, as amended (the "Agreement"). The Investment Company's
Agreement permits the Board of Trustees to issue an unlimited number of
full and fractional shares of beneficial interest at a $.001 par value.
2. Significant Accounting Policies
The Fund's financial statements are prepared in accordance with generally
accepted accounting principles which require the use of management
estimates. The following is a summary of the significant accounting
policies consistently followed by the Fund in the preparation of its
financial statements.
Security valuation: The Fund utilizes the amortized cost valuation method
in accordance with Rule 2a-7 of the 1940 Act, a method by which each
portfolio instrument is initially valued at cost, and thereafter a
constant accretion/amortization to maturity of any discount or premium is
assumed.
Securities transactions: Securities transactions are recorded on the trade
date, which in most instances is the same as the settlement date. Realized
gains and losses from the securities transactions, if any, are recorded on
the basis of identified cost.
Investment income: Interest income is recorded daily on the accrual basis.
Federal income taxes: Since the Investment Company is a Massachusetts
business trust, each fund is a separate corporate taxpayer and determines
its net investment income and capital gains (or losses) and the amounts to
be distributed to each fund's shareholders without regard to the income
and capital gains (or losses) of the other funds.
It is the Fund's intention to qualify as a regulated investment company,
as defined by the Internal Revenue Code of 1986, as amended. This requires
the Fund to distribute all of its taxable income. Therefore, the Fund paid
no federal income taxes and no federal income tax provision was required.
At August 31, 1999, the Fund had a net tax basis capital loss carryover of
$251,856, which may be applied against any realized net taxable gains in
each succeeding year or until its expiration date of August 31, 2003,
whichever occurs first.
Dividends and distributions to shareholders: The Fund declares and records
dividends on net investment income daily and pays them monthly. Capital
gain distributions, if any, are generally declared and paid annually. An
additional distribution may be paid by the Fund to avoid imposition of
federal income tax on any remaining undistributed net investment income
and capital gains. The Fund may periodically make reclassifications among
certain of its capital accounts without impacting net asset value for
differences between federal tax regulations and generally accepted
accounting principles.
20 Annual Report
<PAGE>
SSgA
Money Market Fund
Notes to Financial Statements, continued
August 31, 1999
Expenses: Most expenses can be directly attributed to the Fund. Expenses
which cannot be directly attributed are allocated among all funds based
principally on their relative net assets.
Repurchase agreements: The Fund may engage in repurchase and tri-party
repurchase agreements with several financial institutions whereby the
Fund, through its custodian or third-party custodian, receives delivery of
the underlying securities. The market value of these securities (including
accrued interest) on acquisition date is required to be an amount equal to
at least 102% of the repurchase price. State Street Bank and Trust Company
(the "Adviser") will monitor repurchase agreements daily to determine that
the market value (including accrued interest) of the underlying securities
remains equal to at least 102% of the repurchase price at Fedwire closing
time. The Adviser or third-party custodian will notify the seller to
immediately increase the collateral on the repurchase agreement to 102% of
the repurchase price if collateral falls below 102%.
3. Securities Transactions
Investment transactions: For the year ended August 31, 1999, purchases,
sales, and maturities of investment securities, excluding US Government
and Agency obligations and repurchase agreements, for the Fund aggregated
to $310,700,354,482, $959,414,266, and $306,630,383,261, respectively.
For the year ended August 31, 1999, purchases, sales, and maturities of US
Government and Agency obligations, excluding repurchase agreements
aggregated to $2,368,727,457, $137,053,074, and $1,998,243,000,
respectively.
4. Related Parties
Adviser: The Investment Company has an investment advisory agreement with
State Street Bank and Trust Company under which the Adviser directs the
investments of the Fund in accordance with its investment objectives,
policies, and limitations. For these services, the Fund pays a fee to the
Adviser, calculated daily and paid monthly, at the annual rate of .25% of
its average daily net assets. The Investment Company also has contracts
with the Adviser to provide custody, shareholder servicing and transfer
agent services to the Fund. These amounts are presented in the
accompanying Statement of Operations.
In addition, the Fund has entered into arrangements with its Adviser
whereby credits realized as a result of uninvested cash balances were used
to reduce a portion of the Fund's expenses. During the period, the Fund's
custodian fees were reduced by $103,063 under these arrangements.
Administrator: The Investment Company has an administration agreement with
Frank Russell Investment Management Company (the "Administrator"), a
wholly owned subsidiary of The Northwestern Mutual Life Insurance Company,
under which the Administrator supervises all non-portfolio investment
aspects of the Investment Company's operations and provides adequate
office space and all necessary office equipment and services, including
telephone service, utilities, stationery supplies, and similar items. The
Investment Company pays the Administrator the following fees for services
supplied by the Administrator pursuant to the Administration Agreement:
(i) an annual fee, payable monthly on a pro rata basis, based on the
following percentages of the average daily net assets of all domestic
funds: $0 up to and including $500 million - .06%; over $500 million to
and including $1 billion - .05%; over $1 billion - .03%, and (ii) less an
amount equal to the sum of certain distribution-related expenses incurred
by the Investment Company's Distributor on behalf of the Fund (up to a
maximum of 10%, for the period September 1, 1997 to December 31, 1997, up
to a maximum of 5%, for the
Annual Report 21
<PAGE>
SSgA
Money Market Fund
Notes to Financial Statements, continued
August 31, 1999
period January 1, 1998 to December 31, 1998 and 0% thereafter, of the
asset-based fee determined in (i)). In addition, the Fund reimburses the
Administrator for out-of-pocket expenses and start-up costs for new funds.
Distributor and Shareholder Servicing: The Investment Company has a
Distribution Agreement with Russell Fund Distributors (the "Distributor")
which is a wholly-owned subsidiary of the Administrator to promote and
offer shares of the Investment Company. The Distributor may enter into
sub-distribution agreements with other non-related parties. The amounts
paid to the Distributor are included in the accompanying Statement of
Operations.
The Investment Company has a Distribution Plan pursuant to Rule 12b-1 (the
"Plan") under the 1940 Act. Under this Plan, the Investment Company is
authorized to make payments to the Distributor, or any Shareholder
Servicing Agent, as defined in the Plan, for providing distribution and
marketing services, for furnishing assistance to investors on an ongoing
basis, and for the reimbursement of direct out-of-pocket expenses charged
by the Distributor in connection with the distribution and marketing of
shares of the Investment Company and the servicing of investor accounts.
The Fund has service agreements with the Adviser, State Street Brokerage
Services, Inc. ("SSBSI"), a wholly-owned subsidiary of the Adviser, the
Adviser's Retirement Investment Services Division ("RIS"), the Adviser's
Metropolitan Division of Commercial Banking ("Commercial Banking") and
State Street Solutions ("Solutions")(collectively the "Agents"), as well
as several unaffiliated service providers. For these services, the Fund
pays .025%, .175%, .175%, .175% and .175% to the Adviser, SSBSI, RIS,
Commercial Banking, and Solutions, respectively, based upon the average
daily value of all Fund shares held by or for customers of these Agents.
For the year ended August 31, 1999, the Fund was charged shareholder
servicing expenses of $1,890,581, $418,259, $90,895, $237,479, and
$53,899, by the Adviser, SSBSI, RIS, Commercial Banking, and Solutions,
respectively.
The combined distribution and shareholder servicing payments shall not
exceed .25% of the average daily value of net assets on an annual basis.
The shareholder servicing payments shall not exceed .20% of the average
daily value of net assets on an annual basis. Any payments that exceed the
maximum amount of allowable reimbursement may be carried forward for two
years following the year in which the expenditure was incurred so long as
the plan is in effect. The Fund's responsibility for any such expenses
carried forward shall terminate at the end of two years following the year
in which the expenditure was incurred. The Trustees or a majority of the
Fund's shareholders have the right, however, to terminate the Distribution
Plan and all payments thereunder at any time. The Fund will not be
obligated to reimburse the Distributor for carryover expenses subsequent
to the Distribution Plan's termination or noncontinuance. There were no
carryover expenses as of August 31, 1999.
Board of Trustees: Through May 31, 1999, the Investment Company paid each
Trustee not affiliated with the Investment Company a retainer of $48,000
annually, $1,500 for each board meeting attended, an additional $1,500 for
attending the annual audit committee meeting, and reimbursement for
out-of-pocket expenses. As of June 1, 1999 each Trustee receives $2,500
for each board meeting attended, an additional $2,500 for attending the
annual audit committee meeting and $2,500 for the valuation committee fee
in addition to the $48,000 annual retainer. These expenses are allocated
among all of the Funds based upon their relative net assets.
22 Annual Report
<PAGE>
SSgA
Money Market Fund
Notes to Financial Statements, continued
August 31, 1999
Accrued fees payable to affiliates and trustees as of August 31, 1999 were
as follows:
Advisory fees $3,871,834
Administration fees 261,641
Custodian fees 67,387
Distribution fees 168,236
Shareholder servicing fees 360,023
Transfer agent fees 3,702
Trustees' fees 16,799
----------
$4,749,622
==========
Beneficial Interest: As of August 31, 1999, one shareholder was a record
owner of approximately 34% of the total outstanding shares of the Fund.
5. Fund Share Transactions (On a Constant Dollar Basis):
<TABLE>
<CAPTION>
(amounts in thousands)
Fiscal Years Ended August 31,
----------------------------
1999 1998
------------ -----------
<S> <C> <C>
Proceeds from shares sold .................... 105,783,537 73,966,529
Proceeds from reinvestment of distributions .. 298,285 238,349
Payments for shares redeemed ................. (101,476,531) (73,006,513)
------------ -----------
Total net increase (decrease) ................ 4,605,291 1,198,365
============ ===========
</TABLE>
Annual Report 23
<PAGE>
SSgA Money Market Fund
One International Place, 27th Floor
Boston, Massachusetts 02110
(800) 997-7327
- --------------------------------------------------------------------------------
Trustees
Lynn L. Anderson, Chairman
William L. Marshall
Steven J. Mastrovich
Patrick J. Riley
Richard D. Shirk
Bruce D. Taber
Henry W. Todd
Officers
Lynn L. Anderson, President, Treasurer and CEO
Mark E. Swanson, Assistant Secretary, Assistant
Treasurer and Principal Accounting Officer
J. David Griswold, Vice President and Secretary
Deedra S. Walkey, Assistant Secretary
Rick J. Chase, Assistant Secretary
Carla L. Anderson, Assistant Secretary
Investment Adviser
State Street Bank and Trust Company
225 Franklin Street
Boston, Massachusetts 02110
Custodian, Transfer Agent and
Office of Shareholder Inquiries
State Street Bank and Trust Company
1776 Heritage Drive
North Quincy, Massachusetts 02171
(800) 647-7327
Distributor
Russell Fund Distributors, Inc.
One International Place, 27th Floor
Boston, Massachusetts 02110
(800) 997-7327
Administrator
Frank Russell Investment Management Company
909 A Street
Tacoma, Washington 98402
Legal Counsel
Goodwin, Procter & Hoar LLP
Exchange Place
Boston, Massachusetts 02109
Independent Accountants
PricewaterhouseCoopers LLP
160 Federal Street
Boston, Massachusetts 02110
24 Annual Report
<PAGE>
SSgA(R) Funds
Matrix Equity Fund
Annual Report
August 31, 1999
Table of Contents
Page
Chairman's Letter............................................... 4
Portfolio Management Discussion and Analysis.................... 6
Report of Independent Accountants............................... 8
Financial Statements............................................ 9
Financial Highlights............................................ 15
Notes to Financial Statements................................... 16
Tax Information................................................. 21
Fund Management and Service Providers........................... 22
"SSgA(R)" is a registered trademark of State Street Corporation and is licensed
for use by the SSgA Funds.
This report is prepared from the books and records of the Fund and it is
submitted for the general information of shareholders. This information is for
distribution to prospective investors only when preceded or accompanied by a
SSgA Funds Prospectus containing more complete information concerning the
investment objective and operations of the Fund, charges and expenses. The
Prospectus should be read carefully before an investment is made.
Performance is historical and assumes reinvestment of all dividends and capital
gains. Investment return and principal value will fluctuate so that an
investor's shares, when redeemed, may be worth more or less than when purchased.
Past performance is not indicative of future results. Russell Fund Distributors,
Inc., is the distributor of the SSgA Funds.
<PAGE>
SSgA Matrix Equity Fund
- --------------------------------------------------------------------------------
Letter From the Chairman of State Street Global Advisors
- --------------------------------------------------------------------------------
Dear Shareholders,
It is my pleasure to provide you with the SSgA Funds annual report for the
fiscal year ended August 31, 1999. The SSgA Fund family has grown to include
twenty-three portfolios covering a broad range of investment strategies. The
enclosed information provides an overview of the investment process for the SSgA
Matrix Equity Fund. This overview contains market updates, performance, and
financial information for the Fund. I hope you will find this information a
useful reference as you review your investment strategy.
During the past fiscal year, the SSgA Fund family has opened two new Funds. The
names and investment objectives for these funds are as follows:
The SSgA Aggressive Equity Fund seeks to maximize total return through investing
in US equity securities that are undervalued relative to their growth potential
as measured by SSgA's proprietary models.
The SSgA IAM Shares Fund seeks to maximize total return by investing primarily
in equity securities of companies that have entered into collective bargaining
agreements with the International Association of Machinists and Aerospace
Workers or affiliated labor unions.
Additionally, three SSgA Funds achieved a five-year track record during the 1999
fiscal year. These funds include the two institutional money market funds, SSgA
US Treasury and SSgA Prime Money Market Funds and the SSgA Emerging Markets
Fund. We are proud of our long-term record and look forward to having additional
funds complete their five-year anniversary.
In today's complex global marketplace, we are continually researching new
products and ideas to introduce to our fund family. Here at SSgA, we are
committed to providing a wide range of competitive investment vehicles to
fulfill your investment needs.
I would like to thank you for choosing the SSgA Funds.
Sincerely,
/s/ Nicholas A. Lopardo
Nicholas A. Lopardo
State Street Global Advisors
Chairman and Chief Executive Officer
4 Annual Report
<PAGE>
SSgA Matrix Equity Fund
- --------------------------------------------------------------------------------
Management of the Funds
- --------------------------------------------------------------------------------
[PHOTO]
Nicholas A. Lopardo
Chairman and Chief Executive Officer
A Team Approach to Investment Management
Our investment strategies are the product of the combined experience of our
professional staff. Portfolio Managers work together to develop and enhance the
techniques that drive our investment processes. As a result, the portfolios we
manage benefit from the knowledge of the entire team.
Mr. Theodore Gekas, Principal, has been the portfolio manager primarily
responsible for investment decisions for the SSgA Matrix Equity Fund since April
1999. Prior to joining SSgA, at Citibank Mr. Gekas developed asset allocation
and forecasting models for the global equity and fixed income markets. With the
IBM Retirement Fund, he applied quantitative strategies to manage US and EAFE
equity-indexed and alpha-tilted funds. He holds a BS in Engineering from the
University of Wisconsin, and an MBA in Finance from New York University and
Melboure University (Australia). There are seven other portfolio managers
working with Mr. Gekas.
Annual Report 5
<PAGE>
SSgA Matrix Equity Fund
- --------------------------------------------------------------------------------
Portfolio Management Discussion and Analysis
- --------------------------------------------------------------------------------
Objective: Provide total returns that exceed the S&P 500(R) Index over the long
term.
Invests in: Large capitalization US equity securities.
Strategy: The Fund management team uses a systematic approach to investment
management designed to uncover equity security which are undervalued, with
superior growth potential. This disciplined investment approach rests on
modeling process which evaluates vast amounts of financial data and corporate
earnings forecasts. The results is an investment process which provides strong
long-term total returns through strong bottom-up stock selection within a risk
controlled framework.
- --------------------------------------------------------------------------------
GROWTH OF A $10,000 INVESTMENT
Dates Matrix Equity Fund S&P 500(R) Index**
Inception* $10,000 $10,000
1992 $9,780 $10,093
1993 $12,152 $11,628
1994 $12,687 $12,264
1995 $15,074 $14,895
1996 $17,285 $17,685
1997 $24,675 $24,874
1998 $25,192 $26,887
1999 $33,463 $37,597
================================================================================
Performance Review
For the fiscal year ended August 31, 1999, the SSgA Matrix Equity Fund had a
total return of 32.83%, as compared to the S&P 500(R) Index results of 39.84%.
The Fund's performance is net of operating expenses, whereas Index results do
not include expenses of any kind. This performance dispersion is a result of the
investment process, which analyzes stocks on an industry relative basis, seeking
equities which have increasing earnings estimates, sound cash flow and fair
values, as well as prices which are below recent trends relative to the Index.
This objective, sound investment process was out of favor for the bulk of the
fiscal year, given the momentum-oriented equity environment.
To meet the Fund's strategic objective, the investment process combines proven
stock selection capability with a refined, proprietary portfolio construction
methodology. The Manager seeks to control and diversify the active exposures in
the Fund relative to the S&P 500 Index by controlling sector and industry
weights, stock-specific weights, market capitalization, beta, and yield of the
portfolio. Specifically,
- --------------------------------------------------------------------------------
SSgA Matrix Equity Fund
- --------------------------------------------------------------------------------
Period Ended Growth of Total
08/31/99 $10,000 Return
- -------------- ------------ -------
1 Year $ 13,283 32.83%
5 Year $ 26,380 21.41%+
Inception $ 33,463 17.93%+
- --------------------------------------------------------------------------------
Standard & Poor's(R)
500 Composite Stock Price Index
- --------------------------------------------------------------------------------
Period Ended Growth of Total
08/31/99 $10,000 Return
- -------------- ------------ -------
1 Year $ 13,984 39.84%
5 Year $ 30,656 25.11%+
Inception $ 37,597 19.79%+
See related Notes on following page.
6 Annual Report
<PAGE>
SSgA Matrix Equity Fund
- --------------------------------------------------------------------------------
Portfolio Management Discussion and Analysis
- --------------------------------------------------------------------------------
capitalization is controlled by a method which approximates a weighted median
capitalization constraint. Additionally, individual security-specific weights
are controlled relative to the benchmark weight.
The Manager's stock evaluation process is industry-relative, and as a result, if
the corporate fundamentals of two companies are equally sound, the Fund will
invest in the companies with the better relative valuations. This strategy drove
the Fund's underweighting of those stocks within the benchmark which had
stretched valuations or declining earnings estimates, such as Media One and
Microsoft. Within the Technology sector, the Manager favored those companies
which have the ability to support their capital structures, with favorable
valuations relative to their industry peers. As the market broadened mid-year
1999 and value oriented securities returned to favor, the Fund had strong stock
selection in Consumer Staples, Materials and Technology. Examples include Lucent
Technologies, Alcoa, and Apple Computers.
Market and Portfolio Highlights
For the twelve months ended August 31, 1999, the US equity market, as measured
by the S&P 500 Index, continued apace, posting a 39.84% return. There was
substantial sector rotation throughout the year. While growth-related sectors
led the market through late 1998, value oriented securities returned to favor in
April 1999, as investors recognized the attractive valuations in this neglected
segment of the market. While all sectors of the market had strong absolute
returns for the fiscal year, Technology eclipsed all other sectors, with a 99.4%
return for the twelve month period. Within the Technology sector, Peripherals,
Production Equipment, and Semiconductors were strongest. Following distantly on
the heels of Technology, the Communications Services and the Energy sectors
posted modest yet strong absolute returns of 48.5% and 40.7%, respectively. At
August 31, 1999, the Fund was overweight in Communications Services, with a 9.2%
allocation versus the benchmark exposure of 7.7%, and was underweight Energy,
with a fiscal year-end weight of 4.5% as compared to 6.4% for the Index. The
market was very narrow in late 1998, continuing into 1999, with a very few
stocks driving the bulk of returns. The market fundamentals improved over the
summer, as investors flocked to previously unrecognized segments of the market,
such as smaller cap issues and deep cyclical stocks.
Market volatility increased in mid-1999, as investors anticipated an increase in
rates by the Fed, which became reality in August as Chairman Greenspan hastened
to take a preemptive strike against inflation. While the market's health is
intact and is trading on fundamentals and not the emotions experienced at times
in the past year, inflationary fears have returned. The best plan of action is
an old recipe: maintain a broadly diversified portfolio, focusing on strongly
positioned stocks which can outperform the markets over time.
At August 31, 1999, the SSgA Matrix Equity Fund held 120 stocks with an average
weighted market capitalization of $109.5 billion. Due to the risk controlled
nature of the investment process, the Fund maintains portfolio characteristics
which are consistent with the S&P 500 Index. As the Fund's objective is achieved
through stock selections with a disciplined investment approach, the portfolio
will be fully invested at all times.
- --------------------------------------------------------
Top Ten Issuers
(as a percent of Total Investments) August 31, 1999
- --------------------------------------------------------
Microsoft Corp. 5.0%
International Business Machines Corp. 3.1
General Electric Co. 3.1
Wal-Mart Stores, Inc. 2.9
Lucent Technologies, Inc. 2.9
Cisco Systems, Inc. 2.8
Citigroup, Inc. 2.5
Exxon Corp. 2.0
AT&T Corp. 2.0
Hewlett-Packard Co. 1.8
- --------------------------------------------------------
---------------------
Notes: The following notes relate to the Growth of $10,000 graph and table on
the preceding page.
* The Fund commenced operations on May 4, 1992. Index comparison began May
1, 1992.
** The Standard & Poor's(R) 500 Composite Stock Index is composed of 500
common stocks which are chosen by Standard and Poor's Corporation to best
capture the price performance of a large cross-section of the US publicly
traded stock market. The Index is structured to approximate the general
distribution of industries in the US economy.
+ Annualized.
Performance is historical and assumes reinvestment of all dividends and capital
gains. Investment return and principal value will fluctuate so that an
investor's shares, when redeemed, may be worth more or less than when purchased.
Past performance is not indicative of future results.
Annual Report 7
<PAGE>
Report of Independent Accountants
To the Shareholders and Board of Trustees of the SSgA Funds:
In our opinion, the accompanying statement of assets and liabilities and
statement of net assets, and the related statements of operations and of changes
in net assets and the financial highlights present fairly, in all material
respects, the financial position of SSgA Matrix Equity Fund (the "Fund") at
August 31, 1999, the results of its operations for the fiscal year then ended
and the changes in its net assets for each of the two fiscal years in the period
then ended, and the financial highlights for each of the five fiscal years in
the period then ended, in conformity with generally accepted accounting
principles. These financial statements and financial highlights (hereafter
referred to as "financial statements") are the responsibility of the Fund's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these financial
statements in accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of securities at August 31, 1999 by correspondence with the
custodian and brokers, provide a reasonable basis for the opinion expressed
above.
Boston, Massachusetts
October 11, 1999
/s/ PricewaterhouseCoopers LLP
8 Annual Report
<PAGE>
SSgA
Matrix Equity Fund
Statement of Net Assets
August 31, 1999
Market
Number Value
of (000)
Shares $
--------- ------
Common Stocks - 99.7%
Basic Industries - 2.8%
Alcoa, Inc. 78,300 5,055
Boise Cascade Corp. 68,000 2,474
du Pont (E.I.) de Nemours & Co. 7,003 444
FMC Corp. (a) 39,800 2,318
Premark International, Inc. 83,400 2,773
Solutia, Inc. 125,000 2,500
-------
15,564
-------
Capital Goods - 4.1%
Cummins Engine Co., Inc. 22,900 1,357
General Electric Co. 156,800 17,611
Johnson Controls, Inc. 16,500 1,128
Tyco International, Ltd. 9,000 912
York International Corp. 39,800 1,636
-------
22,644
-------
Consumer Basics - 14.0%
Abbott Laboratories 8,100 351
Allergan, Inc. 50,100 5,004
American Home Products Corp. 2,700 112
Amgen, Inc. (a) 97,300 8,088
Bard (C.R.), Inc. 60,400 2,816
Bristol-Myers Squibb Co. 117,900 8,297
Coca-Cola Co. (The) 60,000 3,589
Columbia/HCA Healthcare Corp. 297,100 7,316
Dean Foods Co. 3,800 153
General Mills, Inc. 43,700 3,660
IBP, Inc. 104,600 2,399
International Home Foods, Inc.
New (a) 10,400 208
Interstate Bakeries Corp. 82,800 1,982
Johnson & Johnson 78,000 7,976
Kroger Co. (a) 117,800 2,724
Lilly (Eli) & Co. 16,000 1,194
Merck & Co., Inc. 85,200 5,724
Pfizer, Inc. 130,800 4,938
Philip Morris Cos., Inc. 60,400 2,261
Procter & Gamble Co. 38,800 3,851
Quaker Oats Co. 47,600 3,180
Safeway, Inc. (a) 3,100 144
Schering-Plough Corp. 29,300 1,540
Triad Hospitals, Inc. (a) 19,400 218
-------
77,725
-------
Consumer Durables - 1.8%
Best Buy Co. (a) 27,800 1,953
Ford Motor Co. 139,600 7,276
PACCAR, Inc. 18,200 999
-------
10,228
-------
Consumer Non-Durables - 9.5%
Anheuser-Busch Cos., Inc. 66,000 5,082
Federated Department Stores, Inc.
(a) 145,200 6,679
Fortune Brands, Inc. 87,100 3,266
Home Depot, Inc. (The) 87,400 5,342
Intimate Brands, Inc. Class A 14,699 567
May Department Stores Co. 147,750 5,771
SuperValu, Inc. 67,400 1,517
TJX Cos., Inc. 227,500 6,569
Toys "R" Us, Inc. (a) 105,700 1,460
Wal-Mart Stores, Inc. 376,500 16,684
-------
52,937
-------
Consumer Services - 0.7%
Darden Restaurants, Inc. 7,900 123
Tricon Global Restaurants, Inc. (a) 93,400 3,795
-------
3,918
-------
Energy - 4.3%
Apache Corp. 44,800 2,038
Burlington Resources, Inc. 48,000 2,007
Chevron Corp. 52,200 4,815
Annual Report 9
<PAGE>
SSgA
Matrix Equity Fund
Statement of Net Assets, continued
August 31, 1999
Market
Number Value
of (000)
Shares $
--------- ------
Exxon Corp. 146,600 11,563
McDermott International, Inc. 11,300 255
Mobil Corp. 11,100 1,136
Phillips Petroleum Co. 45,500 2,322
-------
24,136
-------
Finance - 14.7%
American International Group, Inc. 43,250 4,009
AmSouth Bancorp 60,000 1,313
Bank of America Corp. 54,100 3,273
Bank One Corp. 8,200 329
Chase Manhattan Corp. 105,200 8,804
Citigroup, Inc. 320,450 14,240
Conseco, Inc. 186,200 4,469
Federal National Mortgage
Association 135,600 8,424
Fleet Financial Group, Inc. 191,300 7,616
Lehman Brothers Holdings, Inc. 75,700 4,069
Loews Corp. 61,300 4,812
Merrill Lynch & Co., Inc. 71,000 5,298
Morgan (J.P.) & Co., Inc. 60,300 7,790
Paine Webber Group, Inc. 50,700 1,990
PMI Group, Inc. (The) 57,600 2,448
UnionBanCal Corp. 70,200 2,694
Wells Fargo Co. 12,100 481
-------
82,059
-------
General Business - 4.0%
Donnelley (R.R.) & Sons Co. 115,500 3,624
First Data Corp. 118,600 5,218
SBC Communications, Inc. 89,300 4,286
Time Warner, Inc. 16,700 991
Tribune Co. 54,000 5,039
Viad Corp. 105,500 3,158
-------
22,316
-------
Shelter - 0.7%
Georgia-Pacific Group 86,300 3,571
Louisiana Pacific Corp. 8,700 161
-------
3,732
-------
Technology - 29.8%
Altera Corp. (a) 164,900 6,936
America Online, Inc. (a) 72,500 6,620
Apple Computer, Inc. (a) 121,500 7,920
Applied Materials, Inc. (a) 88,400 6,276
BMC Software, Inc. (a) 94,300 5,069
Cisco Systems, Inc. (a) 231,200 15,664
Computer Associates International,
Inc. 86,900 4,910
Dell Computer Corp. (a) 52,200 2,548
Gateway, Inc. (a) 13,400 1,299
General Dynamics Corp. 47,500 2,993
Hewlett-Packard Co. 98,200 10,348
Intel Corp. 121,300 9,969
International Business Machines
Corp. 142,600 17,763
Lexmark International Group, Inc.
Class A (a) 98,300 7,741
Lucent Technologies, Inc. 260,300 16,675
Microsoft Corp. (a) 308,800 28,564
Northrop Grumman Corp. 20,200 1,465
Sun Microsystems, Inc. (a) 8,100 643
Tellabs, Inc. (a) 125,100 7,443
Texas Instruments, Inc. 3,200 263
Unisys Corp. (a) 71,900 3,092
United Technologies Corp. 28,800 1,904
-------
166,105
-------
10 Annual Report
<PAGE>
SSgA
Matrix Equity Fund
Statement of Net Assets, continued
August 31, 1999
Market
Number Value
of (000)
Shares $
--------- ------
Transportation - 1.0%
Burlington Northern, Inc. 81,400 2,361
Kansas City Southern Industries,
Inc. 39,400 1,825
Tidewater, Inc. 37,500 1,218
-------
5,404
-------
Utilities - 12.3%
Ameritech Corp. 79,600 5,025
AT&T Corp. 246,100 11,075
Bell Atlantic Corp. 140,700 8,618
BellSouth Corp. 151,900 6,873
Coastal Corp. 102,200 4,427
GPU, Inc. 122,400 4,177
GTE Corp. 5,800 398
MCI WorldCom, Inc. (a) 136,600 10,339
Peco Energy Co. 105,200 4,274
PP&L Resources, Inc. 147,900 4,141
Public Service Enterprise Group,
Inc. 54,100 2,218
U.S. West, Inc. 96,900 5,063
UtiliCorp United, Inc. 83,800 1,943
-------
68,571
-------
Total Common Stocks
(cost $485,424) 555,339
-------
Principal Market
Amount Value
(000) (000)
$ $
--------- -------
Short-Term Investments - 2.1%
AIM Short-Term Investment Prime
Portfolio Class A (b) 5,730 5,730
Federated Investors Prime Cash
Obligations Fund (b) 6,064 6,064
-------
Total Short-Term Investments
(cost $11,794) 11,794
-------
Total Investments - 101.8%
(identified cost $497,218) 567,133
Other Assets and Liabilities,
Net - (1.8%) (10,104)
-------
Net Assets - 100.0% 557,029
=======
(a) Nonincome-producing security.
(b) At cost, which approximates market.
See the accompanying notes which are an integral part of the financial
statements.
Annual Report 11
<PAGE>
SSgA
Matrix Equity Fund
Statement of Assets and Liabilities
Amounts in thousands (except per share amount) August 31, 1999
<TABLE>
<S> <C> <C>
Assets
Investments at market (identified cost $497,218) ......................... $567,133
Receivables: .............................................................
Dividends ............................................................. 543
Investments sold ...................................................... 6,120
Fund shares sold ...................................................... 75
Short-term investments held as collateral for securities loaned, at market 11,807
--------
Total Assets .......................................................... 585,678
Liabilities
Payables:
Investments purchased ................................................. $ 12,974
Fund shares redeemed .................................................. 3,178
Accrued fees to affiliates ............................................ 685
Other accrued expenses ................................................ 5
Payable upon return of securities loaned, at market ...................... 11,807
--------
Total Liabilities ..................................................... 28,649
--------
Net Assets ............................................................... $557,029
========
Net Assets Consist of:
Undistributed net investment income ...................................... $ 690
Accumulated net realized gain (loss) ..................................... 70,473
Unrealized appreciation (depreciation) on investments .................... 69,915
Shares of beneficial interest ............................................ 32
Additional paid-in capital ............................................... 415,919
--------
Net Assets ............................................................... $557,029
========
Net Asset Value, offering and redemption price per share:
($557,029,385 divided by 31,807,596 shares of $.001 par value
shares of beneficial interest outstanding) ............................ $ 17.51
========
</TABLE>
See the accompanying notes which are an integral part of the financial
statements.
12 Annual Report
<PAGE>
SSgA
Matrix Equity Fund
Statement of Operations
Amounts in thousands For the Fiscal Year Ended August 31, 1999
<TABLE>
<S> <C> <C>
Investment Income
Dividends ...................................................... $ 7,095
Interest ....................................................... 56
--------
Total Investment Income ...................................... 7,151
Expenses
Advisory fees .................................................. $ 4,135
Administrative fees ............................................ 172
Custodian fees ................................................. 89
Distribution fees .............................................. 200
Transfer agent fees ............................................ 37
Professional fees .............................................. 20
Registration fees .............................................. 32
Shareholder servicing fees ..................................... 504
Trustees' fees ................................................. 11
Miscellaneous .................................................. 6
--------
Expenses before reductions ..................................... 5,206
Expense reductions ............................................. (898)
--------
Expenses, net ................................................ 4,308
--------
Net investment income ............................................. 2,843
--------
Net Realized and Unrealized Gain (Loss)
Net realized gain (loss) on investments ........................... 70,599
Net change in unrealized appreciation (depreciation) on investments 72,637
--------
Net realized and unrealized gain (loss) ........................... 143,236
--------
Net increase (decrease) in net assets resulting from operations ... $146,079
========
</TABLE>
See the accompanying notes which are an integral part of the financial
statements.
Annual Report 13
<PAGE>
SSgA
Matrix Equity Fund
Statement of Changes in Net Assets
Amounts in thousands For the Fiscal Years Ended August 31,
<TABLE>
<CAPTION>
1999 1998
--------- ---------
<S> <C> <C>
Increase (Decrease) in Net Assets
Operations
Net investment income ......................................... $ 2,843 $ 4,932
Net realized gain (loss) ...................................... 70,599 93,449
Net change in unrealized appreciation (depreciation) .......... 72,637 (86,774)
--------- ---------
Net increase (decrease) in net assets resulting from
operations ................................................ 146,079 11,607
--------- ---------
Distributions
From net investment income .................................... (3,191) (5,051)
From net realized gain on investments ......................... (74,416) (74,385)
--------- ---------
Net decrease from distributions ............................. (77,607) (79,436)
--------- ---------
Share Transactions
Net increase (decrease) in net assets from share transactions . 43,480 83,509
--------- ---------
Total Net Increase (Decrease) in Net Assets ...................... 111,952 15,680
Net Assets
Beginning of period ........................................... 445,077 429,397
--------- ---------
End of period (including undistributed net investment income of
$690 and $1,038, respectively) .............................. $ 557,029 $ 445,077
========= =========
</TABLE>
See the accompanying notes which are an integral part of the financial
statements.
14 Annual Report
<PAGE>
SSgA
Matrix Equity Fund
Financial Highlights
The following table includes selected data for a share outstanding throughout
each period and other performance information derived from the financial
statements.
<TABLE>
<CAPTION>
Fiscal Years Ended August 31,
-----------------------------------------------------------------------
1999 1998 1997 1996 1995
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period ........ $ 15.68 $ 18.41 $ 14.13 $ 13.93 $ 12.06
----------- ----------- ----------- ----------- -----------
Income From Operations
Net investment income (a) ................ .09 .17 .21 .24 .28
Net realized and unrealized gain (loss) .. 4.42 .29 5.43 1.64 1.93
----------- ----------- ----------- ----------- -----------
Total Income From Operations ........... 4.51 .46 5.64 1.88 2.21
----------- ----------- ----------- ----------- -----------
Distributions
From net investment income ............... (.10) (.19) (.22) (.24) (.28)
From net realized gain on investments .... (2.58) (3.00) (1.14) (1.44) (.06)
----------- ----------- ----------- ----------- -----------
Total Distributions .................... (2.68) (3.19) (1.36) (1.68) (.34)
----------- ----------- ----------- ----------- -----------
Net Asset Value, End of Period .............. $ 17.51 $ 15.68 $ 18.41 $ 14.13 $ 13.93
=========== =========== =========== =========== ===========
Total Return (%) ............................ 32.83 2.09 42.75 14.67 18.81
Ratios/Supplemental Data:
Net Assets, end of period ($ in thousands) 557,029 445,077 429,397 261,888 198,341
Ratios to average net assets (%):
Operating expenses, net (b) ............ .78 .69 .58 .66 .68
Operating expenses, gross (b) .......... .94 .97 .96 1.04 1.06
Net investment income .................. .52 .97 1.33 1.76 2.25
Portfolio turnover rate (%) .............. 130.98 133.63 117.27 150.68 129.98
</TABLE>
(a) For the period subsequent to August 31, 1998, average month-end shares
outstanding were used for this calculation.
(b) See Note 4 for current period amounts.
Annual Report 15
<PAGE>
SSgA
Matrix Equity Fund
Notes to Financial Statements
August 31, 1999
1. Organization
The SSgA Funds (the "Investment Company") is a series mutual fund,
currently comprised of 23 investment portfolios which are in operation as
of August 31, 1999. These financial statements report on one portfolio,
the SSgA Matrix Equity Fund (the "Fund"). The Investment Company is a
registered and diversified open-end investment company, as defined in the
Investment Company Act of 1940, as amended (the "1940 Act"), that was
organized as a Massachusetts business trust on October 3, 1987 and
operates under a First Amended and Restated Master Trust Agreement, dated
October 13, 1993, as amended (the "Agreement"). The Investment Company's
Agreement permits the Board of Trustees to issue an unlimited number of
full and fractional shares of beneficial interest at a $.001 par value.
2. Significant Accounting Policies
The Fund's financial statements are prepared in accordance with generally
accepted accounting principles which require the use of management
estimates. The following is a summary of the significant accounting
policies consistently followed by the Fund in the preparation of its
financial statements.
Security valuation: United States equity securities listed and traded
principally on any national securities exchange are valued on the basis of
the last sale price or, lacking any sale, at the closing bid price, on the
primary exchange on which the security is traded. United States
over-the-counter equities are valued on the basis of the closing bid
price.
International securities traded on a national securities exchange are
valued on the basis of the last sale price. International securities
traded over the counter are valued on the basis of the mean of bid prices.
In the absence of a last sale or mean bid price, respectively, such
securities may be valued on the basis of prices provided by a pricing
service if those prices are believed to reflect the market value of such
securities.
Money market instruments maturing within 60 days of the valuation date are
valued at amortized cost, a method by which each portfolio instrument is
initially valued at cost, and thereafter a constant accretion/amortization
to maturity of any discount or premium is assumed, unless the Board of
Trustees determines that amortized cost does not represent fair value.
The Fund may value securities for which market quotations are not readily
available at "fair value," as determined in good faith pursuant to
procedures established by the Board of Trustees.
Securities transactions: Securities transactions are recorded on a trade
date basis. Realized gains and losses from securities transactions are
recorded on the basis of identified cost.
Investment income: Dividend income is recorded on the ex-dividend date and
interest income is recorded daily on the accrual basis.
Amortization and accretion: All zero-coupon bond discounts and original
issue discounts are accreted for both tax and financial reporting
purposes. All short- and long-term market premiums/discounts are
amortized/accreted for both tax and financial reporting purposes.
Federal income taxes: Since the Investment Company is a Massachusetts
business trust, each fund is a separate corporate taxpayer and determines
its net investment income and capital gains (or losses) and the amounts to
be
16 Annual Report
<PAGE>
SSgA
Matrix Equity Fund
Notes to Financial Statements, continued
August 31, 1999
distributed to each fund's shareholders without regard to the income and
capital gains (or losses) of the other funds.
It is the Fund's intention to qualify as a regulated investment company,
as defined by the Internal Revenue Code of 1986, as amended. This requires
the Fund to distribute all of its taxable income. Therefore, the Fund paid
no federal income taxes and no federal income tax provision was required.
The Fund's aggregate cost of investments and the composition of unrealized
appreciation and depreciation of investment securities for federal income
tax purposes as of August 31, 1999 are as follows:
Net Unrealized
Federal Tax Unrealized Unrealized Appreciation
Cost Appreciation (Depreciation) (Depreciation)
----------- ------------ -------------- --------------
$499,726,491 $86,914,986 $(19,508,931) $67,406,055
Dividends and distributions to shareholders: Income dividends and capital
gain distributions, if any, are recorded on the ex-dividend date.
Dividends are generally declared and paid quarterly. Capital gain
distributions are generally declared and paid annually. An additional
distribution may be paid by the Fund to avoid imposition of federal income
tax on any remaining undistributed net investment income and capital
gains.
The timing and characterization of certain income and capital gain
distributions are determined in accordance with federal tax regulations
which may differ from generally accepted accounting principles ("GAAP").
As a result, net investment income and net realized gain (or loss) from
investment transactions for a reporting period may differ significantly
from distributions during such period. The differences between tax
regulations and GAAP relate primarily to investments in certain securities
sold at a loss. Accordingly, the Fund may periodically make
reclassifications among certain of its capital accounts without impacting
its net asset value.
Expenses: Most expenses can be directly attributed to the individual Fund.
Expenses which cannot be directly attributed are allocated among all funds
based principally on their relative net assets.
3. Securities Transactions
Investment transactions: For the year ended August 31, 1999, purchases and
sales of investment securities, excluding short-term investments,
aggregated to $706,528,077 and $734,805,246, respectively.
Securities Lending: Effective December 17, 1998, the Investment Company
started its securities lending program. The program allows each Fund to
loan securities with a value up to 33 1/3% of its total assets to certain
brokers. The Fund receives cash (U.S. currency), U.S. Government or U.S.
Government agency obligations as collateral against the loaned securities.
To the extent that a loan is secured by cash collateral, such collateral
shall be invested by State Street Bank and Trust Company in short-term
instruments, money market mutual funds, and such other short-term
investments, provided the investments meet certain quality and
diversification requirements. Under the securities lending arrangement,
the collateral received is recorded on the Fund's statement of assets and
liabilities along with the related obligation to return the collateral. In
those situations where the Company has relinquished control of securities
transferred, it derecognizes the securities and records a receivable from
the counterparty.
Annual Report 17
<PAGE>
SSgA
Matrix Equity Fund
Notes to Financial Statements, continued
August 31, 1999
Income generated from the investment of cash collateral, less negotiated
rebate fees paid to participating brokers and transaction costs, is
divided between the Fund and State Street Bank and Trust Company and is
recorded as interest income for the Fund. To the extent that a loan is
secured by non-cash collateral, brokers pay the Fund negotiated lenders'
fees, which are divided between the Fund and State Street Bank and Trust
Company and are recorded as interest income for the Fund. All collateral
received will be in an amount at least equal to 102% (for loans of U.S.
securities) or 105% (for non-U.S. securities) of the market value of the
loaned securities at the inception of each loan. Should the borrower of
the securities fail financially, there is a risk of delay in recovery of
the securities or loss of rights in the collateral. Consequently, loans
are made only to borrowers which are deemed to be of good financial
standing. As of August 31, 1999, the value of outstanding securities on
loan and the value of collateral amounted to $11,424,865 and $11,807,048,
respectively. The Fund recorded securities lending income of $59,385
during the year.
4. Related Parties
Adviser: The Investment Company has an investment advisory agreement with
State Street Bank and Trust Company under which the Adviser directs the
investments of the Fund in accordance with its investment objectives,
policies, and limitations. For these services, the Fund pays a fee to the
Adviser, calculated daily and paid monthly, at the annual rate of .75% of
its average daily net assets. Beginning January 1, 1998, the Adviser
voluntarily agreed to waive .25% of its advisory fee to the Fund. As of
January 1, 1999, the Adviser voluntarily agreed to waive .125% of its
advisory fee to the Fund. The Investment Company also has contracts with
the Adviser to provide custody, shareholder servicing and transfer agent
services to the Fund. These amounts are presented in the accompanying
Statement of Operations.
In addition, the Fund has entered into arrangements with its Adviser
whereby credits realized as a result of uninvested cash balances were used
to reduce a portion of the Fund's expenses. During the period, the Fund's
custodian fees were reduced by $2,010 under these arrangements.
Administrator: The Investment Company has an administration agreement with
Frank Russell Investment Management Company (the "Administrator"), a
wholly owned subsidiary of The Northwestern Mutual Life Insurance Company,
under which the Administrator supervises all non-portfolio investment
aspects of the Investment Company's operations and provides adequate
office space and all necessary office equipment and services, including
telephone service, utilities, stationery supplies, and similar items. The
Investment Company pays the Administrator the following fees for services
supplied by the Administrator pursuant to the Administration Agreement:
(i) an annual fee, payable monthly on a pro rata basis, based on the
following percentages of the average daily net assets of all domestic
funds: $0 up to and including $500 million - .06%; over $500 million to
and including $1 billion - .05%; over $1 billion - .03%, and (ii) less an
amount equal to the sum of certain distribution-related expenses incurred
by the Investment Company's Distributor on behalf of the Fund (up to a
maximum of 10%, for the period September 1, 1997 to December 31, 1997, up
to a maximum of 5%, for the period January 1, 1998 to December 31, 1998
and 0% thereafter, of the asset-based fee determined in (i)). In addition,
the Fund reimburses the Administrator for out-of-pocket expenses and
start-up costs for new funds.
18 Annual Report
<PAGE>
SSgA
Matrix Equity Fund
Notes to Financial Statements, continued
August 31, 1999
Distributor and Shareholder Servicing: The Investment Company has a
Distribution Agreement with Russell Fund Distributors (the "Distributor")
which is a wholly-owned subsidiary of the Administrator to promote and
offer shares of the Investment Company. The Distributor may enter into
sub-distribution agreements with other non-related parties. The amounts
paid to the Distributor are included in the accompanying Statement of
Operations.
The Investment Company has a Distribution Plan pursuant to Rule 12b-1 (the
"Plan") under the 1940 Act. Under this Plan, the Investment Company is
authorized to make payments to the Distributor, or any Shareholder
Servicing Agent, as defined in the Plan, for providing distribution and
marketing services, for furnishing assistance to investors on an ongoing
basis, and for the reimbursement of direct out-of-pocket expenses charged
by the Distributor in connection with the distribution and marketing of
shares of the Investment Company and the servicing of investor accounts.
The Fund has service agreements with the Adviser, State Street Brokerage
Services, Inc. ("SSBSI"), a wholly- owned subsidiary of the Adviser, the
Adviser's Retirement Investment Services Division ("RIS") the Adviser's
Metropolitan Division of Commercial Banking ("Commercial Banking") and
State Street Solutions ("Solutions")(collectively the "Agents"), as well
as several unaffiliated service providers. For these services, the Fund
pays .025%, .175%, .175%, .175%, and .175% to the Adviser, SSBSI, RIS,
Commercial Banking, and Solutions, respectively, based upon the average
daily value of all Fund shares held by or for customers of these Agents.
For the year ended August 31, 1999, the Fund was charged shareholder
servicing expenses of $124,966, $3,500, $135,697 and $239,208, by the
Adviser, SSBSI, RIS, and Solutions, respectively. The Fund did not incur
any expenses from Commercial Banking during this period.
The combined distribution and shareholder servicing payments shall not
exceed .25% of the average daily value of net assets on an annual basis.
The shareholder servicing payments shall not exceed .20% of the average
daily value of net assets on an annual basis. Any payments that exceed the
maximum amount of allowable reimbursement may be carried forward for two
years following the year in which the expenditure was incurred so long as
the plan is in effect. The Fund's responsibility for any such expenses
carried forward shall terminate at the end of two years following the year
in which the expenditure was incurred. The Trustees or a majority of the
Fund's shareholders have the right, however, to terminate the Distribution
Plan and all payments thereunder at any time. The Fund will not be
obligated to reimburse the Distributor for carryover expenses subsequent
to the Distribution Plan's termination or noncontinuance. There were no
carryover expenses as of August 31, 1999.
Affiliated Brokerage: The Fund placed a portion of its portfolio
transactions with SSBSI, an affiliated broker dealer of the Fund's
Adviser. The commissions paid to SSBSI were $296,885 for the year ended
August 31, 1999.
Board of Trustees: Through May 31, 1999, the Investment Company paid each
Trustee not affiliated with the Investment Company a retainer of $48,000
annually, $1,500 for each board meeting attended, an additional $1,500 for
attending the annual audit committee meeting, and reimbursement for
out-of-pocket expenses. As of June 1, 1999, each Trustee receives $2,500
for each board meeting attended, an additional $2,500 for attending the
annual audit committee meeting and $2,500 for the valuation committee fee
in addition to the $48,000 annual retainer. These expenses are allocated
among all of the Funds based upon their relative net assets.
Annual Report 19
<PAGE>
SSgA
Matrix Equity Fund
Notes to Financial Statements, continued
August 31, 1999
Accrued fees payable to affiliates and trustees as of August 31, 1999 were
as follows:
Advisory fees $612,440
Administration fees 16,327
Custodian fees 12,576
Distribution fees 4,180
Shareholder servicing fees 18,413
Transfer agent fees 15,292
Trustees' fees 5,391
--------
$684,619
========
Beneficial Interest: As of August 31, 1999, three shareholders (who were
also affiliates of the Investment Company) were record owners of
approximately 23%, 13% and 10%, respectively, of the total outstanding
shares of the Fund.
5. Fund Share Transactions (amounts in thousands)
<TABLE>
<CAPTION>
Fiscal Years Ended August 31,
----------------------------------------------
1999 1998
-------------------- --------------------
Shares Dollars Shares Dollars
------- -------- ------- --------
<S> <C> <C> <C> <C>
Proceeds from shares sold ...... 11,235 $ 181,145 11,656 $ 208,056
Proceeds from reinvestment of
distributions ................ 5,170 73,530 4,508 75,301
Payments for shares redeemed ... (12,986) (211,195) (11,100) (199,848)
------- -------- ------- --------
Total net increase (decrease) .. 3,419 $ 43,480 5,064 $ 83,509
======= ======== ======= ========
</TABLE>
6. Line of Credit
The Fund and several affiliated Funds (the "Participants") share in a $50
million revolving credit facility for temporary or emergency purposes,
including the meeting of redemption requests that otherwise might require
the untimely disposition of securities. The Participants are charged an
annual commitment fee of .09% (.065% prior to July 15, 1999) on the
average daily unused amount of the aggregate commitment, which is
allocated among each of the Participants. Interest, at the Federal Fund
Rate plus .50% annually, is calculated based on the market rates at the
time of the borrowing. The Fund may borrow up to a maximum of 33 1/3
percent of the value of its net assets under the agreement. The Fund did
not have any drawdowns during the year.
7. Dividends
On September 1, 1999, the Board of Trustees declared a dividend of $.0193
from net investment income, payable on September 7, 1999 to shareholders
of record on September 2, 1999.
20 Annual Report
<PAGE>
SSgA
Matrix Equity Fund
Tax Information
August 31, 1999 (Unaudited)
The Fund paid distributions of $67,372,095 from net long-term capital gains
during its taxable year ended August 31, 1999.
Please consult a tax advisor for questions about federal or state income tax
laws.
Annual Report 21
<PAGE>
SSgA Matrix Equity Fund
One International Place, 27th Floor
Boston, Massachusetts 02110
(800) 997-7327
- --------------------------------------------------------------------------------
Trustees
Lynn L. Anderson, Chairman
William L. Marshall
Steven J. Mastrovich
Patrick J. Riley
Richard D. Shirk
Bruce D. Taber
Henry W. Todd
Officers
Lynn L. Anderson, President, Treasurer and CEO
Mark E. Swanson, Assistant Secretary, Assistant
Treasurer and Principal Accounting Officer
J. David Griswold, Vice President and Secretary
Deedra S. Walkey, Assistant Secretary
Rick J. Chase, Assistant Secretary
Carla L. Anderson, Assistant Secretary
Investment Adviser
State Street Bank and Trust Company
225 Franklin Street
Boston, Massachusetts 02110
Custodian, Transfer Agent and
Office of Shareholder Inquiries
State Street Bank and Trust Company
1776 Heritage Drive
North Quincy, Massachusetts 02171
(800) 647-7327
Distributor
Russell Fund Distributors, Inc.
One International Place, 27th Floor
Boston, Massachusetts 02110
(800) 997-7327
Administrator
Frank Russell Investment Management Company
909 A Street
Tacoma, Washington 98402
Legal Counsel
Goodwin, Procter & Hoar LLP
Exchange Place
Boston, Massachusetts 02109
Independent Accountants
PricewaterhouseCoopers LLP
160 Federal Street
Boston, Massachusetts 02110
22 Annual Report
<PAGE>
SSgA(R) Funds
Prime Money Market Fund
Annual Report
August 31, 1999
Table of Contents
Page
Chairman's Letter............................................. 4
Portfolio Management Discussion and Analysis.................. 6
Report of Independent Accountants............................. 8
Financial Statements.......................................... 9
Financial Highlights.......................................... 17
Notes to Financial Statements................................. 18
Fund Management and Service Providers......................... 22
"SSgA(R)" is a registered trademark of State Street Corporation and is licensed
for use by the SSgA Funds.
This report is prepared from the books and records of the Fund and it is
submitted for the general information of shareholders. This information is for
distribution to prospective investors only when preceded or accompanied by a
SSgA Funds Prospectus containing more complete information concerning the
investment objective and operations of the Fund, charges and expenses. The
Prospectus should be read carefully before an investment is made.
Performance is historical and assumes reinvestment of all dividends and capital
gains. Investment return and principal value will fluctuate so that an
investor's shares, when redeemed, may be worth more or less than when purchased.
Past performance is not indicative of future results. An investment in a money
market fund is neither insured nor guaranteed by the US government. There can be
no assurance that a money market fund will be able to maintain a stable net
asset value of $1.00 per share. Russell Fund Distributors, Inc., is the
distributor of the SSgA Funds.
<PAGE>
SSgA Prime Money Market Fund
- --------------------------------------------------------------------------------
Letter From the Chairman of State Street Global Advisors
- --------------------------------------------------------------------------------
Dear Shareholders,
It is my pleasure to provide you with the SSgA Funds annual report for the
fiscal year ended August 31, 1999. The SSgA Fund family has grown to include
twenty-three portfolios covering a broad range of investment strategies. The
enclosed information provides an overview of the investment process for the SSgA
Prime Money Market Fund. This overview contains market updates, performance, and
financial information for the Fund. I hope you will find this information a
useful reference as you review your investment strategy.
During the past fiscal year, the SSgA Fund family has opened two new Funds. The
names and investment objectives for these funds are as follows:
The SSgA Aggressive Equity Fund seeks to maximize total return through investing
in US Equity securities that are undervalued relative to their growth potential
as measured by SSgA's proprietary models.
The SSgA IAM Shares Fund seeks to maximize total return by investing primarily
in equity securities of companies that have entered into collective bargaining
agreements with the International Association of Machinists and Aerospace
Workers or affiliated labor unions.
Additionally, three SSgA Funds achieved a five-year track record during the 1999
fiscal year. These funds include the two institutional money market funds, SSgA
US Treasury and SSgA Prime Money Market Funds and the SSgA Emerging Markets
Fund. We are proud of our long-term record and look forward to having additional
funds complete their five-year anniversary.
In today's complex global marketplace, we are continually researching new
products and ideas to introduce to our fund family. Here at SSgA, we are
committed to providing a wide range of competitive investment vehicles to
fulfill your investment needs.
I would like to thank you for choosing the SSgA Funds.
Sincerely,
/s/ Nicholas A. Lopardo
Nicholas A. Lopardo
State Street Global Advisors
Chairman and Chief Executive Officer
4 Annual Report
<PAGE>
SSgA Prime Money Market Fund
- --------------------------------------------------------------------------------
Management of the Funds
- --------------------------------------------------------------------------------
[PHOTO]
Nicholas A. Lopardo
Chairman and Chief Executive Officer
A Team Approach to Investment Management
Our investment strategies are the product of the combined experience of our
professional staff. Portfolio Managers work together to develop and enhance the
techniques that drive our investment processes. As a result, the portfolios we
manage benefit from the knowledge of the entire team.
Ms. Lisa Hatfield, Principal, has been the portfolio manager primarily
responsible for investment decisions regarding the SSgA Prime Money Market Fund
since January 1998. Ms. Hatfield has been with State Street since 1986 and has
managed several money market funds since 1987. She received a BS from Suffolk
University. There are ten other portfolio managers working with Ms. Hatfield.
Annual Report 5
<PAGE>
SSgA Prime Money Market Fund
- --------------------------------------------------------------------------------
Portfolio Management Discussion and Analysis
- --------------------------------------------------------------------------------
Objective: Maximize current income while preserving capital and liquidity.
Invests in: High quality money market instruments including certificates of
deposit, time deposits, bankers acceptances, commercial paper, corporate
medium-term notes, US Government Treasury and Agency notes, and repurchase
agreements.
Strategy: Fund Managers base their decisions on the relative attractiveness of
different money market investments which can vary depending on the general level
of interest rates as well as supply/demand imbalances in the market.
- --------------------------------------------------------------------------------
GROWTH OF A $10,000 INVESTMENT
Dates Prime Money Market Fund Salomon Brothers 3-Month T-Bill Index
Inception* $10,000 $10,000
1994 $10,209 $10,200
1995 $10,803 $10,769
1996 $11,409 $11,344
1997 $12,038 $11,940
1998 $12,716 $12,564
1999 $13,362 $13,148
================================================================================
Performance Review
The Fund had a total return of 5.08% for the fiscal year ended August 31, 1999.
This compares favorably to the return of the benchmark Salomon Smith Barney
3-Month Treasury Bill Index, which gained 4.65% for the same period. The Fund's
performance is net of operating expenses, whereas Index results do not include
expenses of any kind. The Salomon Smith Barney 3-Month Treasury Bill Index was
chosen as a standard, well known representation of money market rates.
Market and Portfolio Highlights
The year began with the Russian government defaulting on portions of its debt,
and international investors losing billions of dollars as a result. Russia's
meltdown sent tremors through Latin American economies and posed a significant
threat to Mexico, a major US trading partner. This turmoil caused a huge "flight
to quality", where US treasuries were deemed one of the only safe investments.
As treasuries rallied and credit spreads widened, it became apparent that market
participants, as well as the Fed, feared a global financial meltdown.
- --------------------------------------------------------------------------------
SSgA Prime Money Market Fund
- --------------------------------------------------------------------------------
Period Ended Growth of Total
08/31/99 $10,000 Return
- -------------- ------------ -------
1 Year $ 10,508 5.08%
5 Years $ 13,088 5.53%+
Inception $ 13,362 5.39%+
- --------------------------------------------------------------------------------
Salomon Smith Barney 3-Month Treasury Bill Index
- --------------------------------------------------------------------------------
Period Ended Growth of Total
08/31/99 $10,000 Return
- -------------- ------------ -------
1 Year $ 10,465 4.65%
5 Years $ 12,890 5.21%+
Inception $ 13,148 5.10%+
See related Notes on following page.
6 Annual Report
<PAGE>
SSgA Prime Money Market Fund
- --------------------------------------------------------------------------------
Portfolio Management Discussion and Analysis
- --------------------------------------------------------------------------------
On September 29, 1998, the Federal Reserve Open Market Committee (FOMC) voted to
cut the Federal Funds rate by 25 basis points to 5.25%, its lowest level since
January 1996. This action was quickly followed by two more 25 basis point
easings, with the last move occurring on November 17th. The US economy remained
robust, with both low employment and low inflation, but lower rates were needed
to head off the potentially serious threat of lack of liquidity in the markets
and ultimately to continued US economic growth. The last Fed rate cut was an
insurance policy, making it clear that the world's largest Central Bank was
willing to help minimize further market contagion.
The actions by the Federal Reserve were successful in bolstering liquidity and
preserving growth. The wealth effect from real estate and stock market gains,
coupled with a historically low unemployment rate, drove confidence and spending
to record highs. GDP growth has averaged over 3% for the past two quarters,
while inflation indicators have remained markedly well behaved. Recently,
concerns of increasing asset prices, slowing productivity gains, and recovering
foreign economies across the Pacific-Rim raised concerns with the Federal
Reserve. On June 30, 1999, they opted to raise the Federal Funds rate from 4.75%
to 5.00%, and again on August 24th to 5.25%. These moves by the FOMC retract
most of last fall's easings and leaves the door open to another tightening, if
required, in the final quarter of 1999.
In the last year, the SSgA Prime Money Market Fund was managed consistently with
its objective of providing safety of principal and liquidity by investing in
high quality investments and providing competitive returns. The Fund's net
assets trended higher, increasing by 14% over the past year to $2.4 billion at
August 31, 1999. New cash was invested in a combination of fixed and floating
rate securities. The Fund also looked to increase exposure in one- to
three-month ABS-CP due to an exceptional high yield advantage over bank and
finance commercial paper. Over the past year, mounting pressures from continuing
domestic strength and recovering foreign economies created a very steep short
yield curve due to the markets perception of Fed tightening. The Fund took
advantage of higher rates extending in one-year securities on market weakness.
Given that the Fed may increase interest rates throughout 1999, the Manager also
looked to increase exposure in floating rate securities which offer protection
against rising interest rates. The Fund's investment strategy concentrated
primarily on indices such as one- and three-month LIBOR (London Interbank
Offering Rate), with a small allocation based on Fed Funds and Prime rates. The
average maturity of the Fund ranged from 45 to 66 days over the last year,
ending at 65 on August 31, 1999.
- -------------------------------------------------------------
Top Five Holdings (by investment type,
as a percent of Total Investments) August 31, 1999
- -------------------------------------------------------------
Corporate Bonds and Notes 39.0%
Domestic Commercial Paper 24.7
Yankee Certificates of Deposit 11.0
Foreign Commercial Paper 6.4
Domestic Time Deposits 6.3
- -------------------------------------------------------------
---------------------
Notes: The following notes relate to the Growth of $10,000 graph and table on
the preceding page.
* The Fund commenced operations on February 22, 1994. Index comparison began
March 1, 1994.
** Equal dollar amounts of 3-month Treasury bills are purchased at the
beginning of each of three consecutive months. As each bill matures, all
proceeds are rolled over or reinvested in a new 3-month bill. The income
used to calculate the monthly return is derived by subtracting the
original amount invested from the maturity value. The yield curve average
is the basis for calculating the return on the Index. The Index is
rebalanced monthly by market capitalization.
+ Annualized.
Performance is historical and assumes reinvestment of all dividends and capital
gains. Investment return and principal value will fluctuate so that an
investor's shares, when redeemed, may be worth more or less than when purchased.
Past performance is not indicative of future results.
An investment in a money market fund is neither insured nor guaranteed by the US
Government. There can be no assurance that a money market fund will be able to
maintain a stable net asset value of $1.00 per share.
Annual Report 7
<PAGE>
Report of Independent Accountants
To the Shareholders and Board of Trustees
of the SSgA Funds:
In our opinion, the accompanying statement of assets and liabilities and
statement of net assets, and the related statements of operations and of changes
in net assets and the financial highlights present fairly, in all material
respects, the financial position of SSgA Prime Money Market Fund (the "Fund") at
August 31, 1999, the results of its operations for the fiscal year then ended
and the changes in its net assets for each of the two fiscal years in the period
then ended, and the financial highlights for each of the five fiscal years in
the period then ended, in conformity with generally accepted accounting
principles. These financial statements and financial highlights (hereafter
referred to as "financial statements") are the responsibility of the Fund's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these financial
statements in accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of securities at August 31, 1999 by correspondence with the
custodian and brokers, provide a reasonable basis for the opinion expressed
above.
Boston, Massachusetts
October 11, 1999
/s/ PricewaterhouseCoopers LLP
8 Annual Report
<PAGE>
SSgA
Prime Money Market Fund
Statement of Net Assets
August 31, 1999
<TABLE>
<CAPTION>
Principal
Amount Date Value
(000) Rate of (000)
$ % Maturity* $
--------- ------ --------- -----
<S> <C> <C> <C> <C>
Corporate Bonds and Notes - 39.3%
Abbey National Treasury Services PLC (MTN) ........................ 24,750 5.075 01/13/00 24,748
Abbey National Treasury Services PLC (MTN) ........................ 12,000 5.185 05/12/00 11,993
Associates Corp. NA (MTN)(a) ...................................... 20,000 5.168 03/20/00 19,992
AT&T Co. (MTN)(a) ................................................. 25,000 5.270 07/13/00 24,991
AT&T Co. (MTN)(a) ................................................. 25,000 5.404 08/07/00 25,000
Bank of America NA (MTN)(a) ....................................... 25,000 5.250 01/31/00 24,997
Bank of NY, Inc. (MTN)(a) ......................................... 25,000 5.400 05/15/00 24,991
Barclays Bank PLC (MTN)(a) ........................................ 15,000 5.390 05/12/00 14,994
Branch Banking & Trust (MTN)(a) ................................... 25,000 5.550 02/18/00 24,998
Branch Banking & Trust (MTN)(a) ................................... 25,000 5.740 03/08/00 24,992
Cit Group, Inc. (MTN)(a) .......................................... 25,000 5.383 05/15/00 24,988
Comerica Bank, Michigan (MTN)(a) .................................. 25,000 5.129 03/07/00 24,994
Comerica Bank, Michigan (MTN)(a) .................................. 20,000 5.400 04/17/00 19,993
Comerica Bank, Michigan (MTN)(a) .................................. 15,000 5.144 05/11/00 14,994
Diageo Capital PLC (MTN)(a) ....................................... 20,000 5.319 02/11/00 19,497
Du Pont E I De Nemours & Co. ...................................... 20,000 9.150 04/15/00 20,474
Emerson Electric Co. (MTN) ........................................ 20,000 5.125 03/17/00 19,990
First National Bank, Illinois ..................................... 10,000 6.000 08/11/00 9,995
First Union National Bank (a) ..................................... 25,000 5.195 09/01/00 24,999
First Union National Bank (MTN) ................................... 25,000 5.300 03/01/00 25,000
First Union National Bank (MTN)(a) ................................ 25,000 5.573 08/31/00 25,000
Ford Motor Credit Co. (MTN)(a) .................................... 50,000 5.450 05/05/00 50,000
General American Life Insurance (MTN)(a)(c) ....................... 45,000 5.230 05/18/00 45,000
General Electric Capital Corp. (MTN)(a) ........................... 15,000 5.049 09/09/99 15,000
General Electric Capital Corp. (MTN)(a) ........................... 25,000 5.260 04/12/00 25,000
General Electric Capital Corp. (MTN)(a) ........................... 15,000 5.390 05/12/00 15,000
GTE Corp. (MTN)(a) ................................................ 25,000 4.985 06/02/00 24,979
Household Finance Corp. (MTN) ..................................... 20,000 5.678 07/07/00 19,992
Household Finance Corp. (MTN)(a) .................................. 25,000 5.040 04/17/00 24,990
Key Bank NA ....................................................... 20,000 5.670 07/17/00 19,992
Key Bank NA (MTN)(a) .............................................. 25,000 5.328 04/20/00 25,000
Nationsbank Corp. (a) ............................................. 25,000 5.365 02/02/00 25,028
Nationsbank NA (MTN)(a) ........................................... 25,000 5.120 02/22/00 24,998
PNC Bank NA (MTN)(a) .............................................. 25,000 5.289 01/31/00 24,996
STEERS-A37 (a) .................................................... 43,483 5.339 10/25/11 43,483
US Bancorp (MTN)(a) ............................................... 15,000 5.329 07/14/00 14,996
Wells Fargo & Co. (MTN)(a) ........................................ 15,000 5.355 06/13/00 14,993
Westpac Banking Corp. ............................................. 25,000 5.010 02/04/00 24,996
</TABLE>
Annual Report 9
<PAGE>
SSgA
Prime Money Market Fund
Statement of Net Assets, continued
August 31, 1999
<TABLE>
<CAPTION>
Principal
Amount Date Value
(000) Rate of (000)
$ % Maturity* $
--------- ------ --------- -----
<S> <C> <C> <C> <C>
Westpac Banking Corp. ............................................. 10,000 5.825 08/02/00 9,996
Xerox Capital PLC (MTN)(a) ........................................ 25,000 5.413 08/18/00 24,985
Xerox Credit Corp. (MTN) .......................................... 25,000 5.113 03/21/00 24,986
---------
Total Corporate Bonds and Notes (cost $950,030) ................................................................. 950,030
---------
Domestic Certificates of Deposit - 2.1%
Fifth Third Bancorp ............................................... 25,000 5.150 09/30/99 25,000
First Bank NA, Tennessee .......................................... 25,000 5.310 09/24/99 25,000
---------
Total Domestic Certificates of Deposit (cost $50,000) ........................................................... 50,000
---------
Eurodollar Certificates of Deposit - 3.3%
Abbey National Treasury Services PLC .............................. 30,000 5.050 11/12/99 30,000
Barclays Bank ..................................................... 10,000 5.800 07/28/00 10,000
Halifax PLC ....................................................... 15,000 5.300 12/01/99 15,000
KBC Bank NV ....................................................... 25,000 5.180 09/20/99 25,000
---------
Total Eurodollar Certificates of Deposit (cost $80,000) ......................................................... 80,000
---------
Yankee Certificates of Deposit - 11.1%
ABN Amro Bank NV Chicago (a) ...................................... 25,000 5.395 05/25/00 24,989
Bank of Montreal, Illinois ........................................ 20,000 5.045 11/12/99 19,999
Bank of Nova Scotia ............................................... 15,000 5.800 02/09/00 15,000
Bank of Nova Scotia ............................................... 20,000 5.800 08/02/00 19,991
Canadian Imperial Bank ............................................ 19,000 5.000 01/27/00 18,996
Canadian Imperial Bank ............................................ 20,000 5.080 04/12/00 19,992
Canadian Imperial Bank (a) ........................................ 30,000 5.185 04/07/00 29,987
National Westminster Bank PLC ..................................... 25,000 4.980 01/07/00 24,997
Royal Bank of Canada, New York (a) ................................ 20,000 5.350 02/24/00 20,000
Royal Bank of Canada, New York (a) ................................ 20,000 5.390 05/04/00 19,992
Svenska Handelsbanken ............................................. 10,000 5.065 02/08/00 9,999
Svenska Handelsbanken ............................................. 10,000 5.055 02/10/00 9,999
Svenska Handelsbanken ............................................. 10,000 5.210 03/01/00 9,998
Toronto Dominion Bank ............................................. 15,000 4.980 01/07/00 14,998
Westpac Banking Corp. ............................................. 10,000 4.895 09/17/99 10,000
---------
Total Yankee Certificates of Deposit (cost $268,937) ............................................................ 268,937
---------
</TABLE>
10 Annual Report
<PAGE>
SSgA
Prime Money Market Fund
Statement of Net Assets, continued
August 31, 1999
<TABLE>
<CAPTION>
Principal
Amount Date Value
(000) Rate of (000)
$ % Maturity* $
--------- ------ --------- -----
<S> <C> <C> <C> <C>
Domestic Commercial Paper - 24.9%
Assets Securitization Cooperative Corp. ........................... 10,000 5.125 09/08/99 9,990
Bank of New York .................................................. 15,000 5.120 09/16/99 14,968
Delaware Funding Corp. ............................................ 8,000 5.130 09/21/99 7,977
Diageo Capital PLC ................................................ 20,000 5.319 08/10/00 19,985
Edison Asset Securitization ....................................... 20,000 5.160 09/08/99 19,980
Edison Asset Securitization ....................................... 28,015 5.160 10/01/99 27,895
Edison Asset Securitization ....................................... 8,000 5.190 10/15/99 7,949
Edison Asset Securitization ....................................... 10,000 5.380 11/22/99 9,877
Falcon Asset Securitization ....................................... 25,000 5.140 09/02/99 24,996
Falcon Asset Securitization ....................................... 20,000 5.180 09/10/99 19,974
Falcon Asset Securitization ....................................... 22,000 5.130 09/13/99 21,962
Falcon Asset Securitization ....................................... 10,000 5.180 09/17/99 9,977
Falcon Asset Securitization ....................................... 15,000 5.280 09/17/99 14,965
Falcon Asset Securitization ....................................... 15,000 5.300 09/22/99 14,954
Falcon Asset Securitization ....................................... 18,885 5.310 09/27/99 18,813
GE Capital International Funding .................................. 20,000 5.130 09/20/99 19,946
GE Capital International Funding .................................. 30,000 5.300 09/23/99 29,903
GE Capital International Funding .................................. 10,000 5.590 02/10/00 9,748
Old Line Funding Corp. ............................................ 40,457 5.130 09/03/99 40,445
Old Line Funding Corp. ............................................ 17,000 5.130 09/07/99 16,985
Old Line Funding Corp. ............................................ 17,500 5.180 09/09/99 17,480
Old Line Funding Corp. ............................................ 10,118 5.200 09/10/99 10,105
Old Line Funding Corp. ............................................ 25,869 5.280 09/16/99 25,812
Preferred Receivables Funding Corp. ............................... 25,000 5.170 10/20/99 24,824
Preferred Receivables Funding Corp. ............................... 15,000 5.360 10/27/99 14,875
Thunder Bay Funding, Inc. ......................................... 23,000 5.210 09/14/99 22,957
Thunder Bay Funding, Inc. ......................................... 19,555 5.350 09/16/99 19,511
Thunder Bay Funding, Inc. ......................................... 10,000 5.280 09/17/99 9,977
Thunder Bay Funding, Inc. ......................................... 15,415 5.250 09/20/99 15,372
Thunder Bay Funding, Inc. ......................................... 15,000 5.300 09/20/99 14,958
Wells Fargo & Co. ................................................. 25,000 5.130 09/27/99 24,907
Wells Fargo & Co. ................................................. 25,000 5.140 09/27/99 24,907
Wells Fargo & Co. ................................................. 15,000 5.710 02/16/00 14,600
---------
Total Domestic Commercial Paper (cost $601,574) ................................................................. 601,574
---------
</TABLE>
Annual Report 11
<PAGE>
SSgA
Prime Money Market Fund
Statement of Net Assets, continued
August 31, 1999
<TABLE>
<CAPTION>
Principal
Amount Date Value
(000) Rate of (000)
$ % Maturity* $
--------- ------ --------- -----
<S> <C> <C> <C> <C>
Foreign Commercial Paper - 6.5%
ANZ Delaware ...................................................... 25,000 5.360 12/02/99 24,658
Cregem NA, Inc. ................................................... 20,000 5.330 12/20/99 19,674
Den Denske Corp. .................................................. 20,000 4.885 09/01/99 20,000
Nordbanken NA, Inc. ............................................... 25,000 5.180 10/27/99 24,799
UBS Finance Delaware, Inc. ........................................ 30,000 5.320 12/20/99 29,512
Westpac Capital Corp. ............................................. 18,000 4.820 10/05/99 17,918
Woolwich PLC ...................................................... 20,000 5.230 03/06/00 19,457
---------
Total Foreign Commercial Paper (cost $156,018) .................................................................. 156,018
---------
Domestic Time Deposits - 6.4%
Chase Bank ........................................................ 100,000 5.562 09/01/99 100,000
Harris Trust & Savings Bank, Illinois ............................. 25,000 5.300 09/30/99 25,000
National City Bank ................................................ 29,041 5.625 09/01/99 29,041
---------
Total Domestic Time Deposits (cost $154,041) .................................................................... 154,041
---------
Eurodollar Time Deposits - 4.1%
Bayerische Hypo-Vereinsbank ....................................... 100,000 5.593 09/01/99 100,000
---------
Total Eurodollar Time Deposits (cost $100,000) .................................................................. 100,000
---------
United States Government Agencies - 3.1%
Federal Home Loan Bank ............................................ 25,000 4.900 01/14/00 24,998
Federal Home Loan Bank (a) ........................................ 25,000 5.295 04/14/00 24,993
Federal Home Loan Bank (a) ........................................ 25,000 5.120 08/03/00 24,991
---------
Total United States Government Agencies (cost $74,982) .......................................................... 74,982
---------
</TABLE>
12 Annual Report
<PAGE>
SSgA
Prime Money Market Fund
Statement of Net Assets, continued
August 31, 1999
Value
(000)
$
---------
Total Investments - 100.8% (amortized cost $2,435,582)(b) .......... 2,435,582
Other Assets and Liabilities, Net - (0.8%) ......................... (20,351)
---------
Net Assets - 100.0% ................................................ 2,415,231
=========
* The interest rate for all securities with a maturity greater than thirteen
months has an automatic reset feature resulting in an effective maturity
of thirteen months or less.
(a) Adjustable or floating rate security.
(b) The identified cost for federal income tax purposes is the same as shown
above.
(c) On September 29, 1999, the Board of Trustees and Adviser have agreed to
exchange the General American security subject to funding agreement
contracts for MetLife Funding Agreement Contracts, which will be
liquidated on October 1, 1999.
Abbreviations:
MTN - Medium Term Note
NV - Nonvoting
See the accompanying notes which are an integral part of the financial
statements.
Annual Report 13
<PAGE>
SSgA
Prime Money Market Fund
Statement of Assets and Liabilities
Amounts in thousands (except per share amount) August 31, 1999
<TABLE>
<S> <C> <C>
Assets
Investments at amortized cost which approximates market .................................. $ 2,435,582
Interest receivable ...................................................................... 16,430
------------
Total Assets ....................................................................... 2,452,012
Liabilities
Payables:
Investments purchased ............................................. $ 24,658
Dividends ......................................................... 11,302
Accrued fees to affiliates ........................................ 673
Other accrued expenses ............................................ 148
------------
Total Liabilities .................................................................. 36,781
------------
Net Assets ............................................................................... $ 2,415,231
============
Net Assets Consist of:
Accumulated net realized gain (loss) ..................................................... $ 51
Shares of beneficial interest ............................................................ 2,415
Additional paid-in capital ............................................................... 2,412,765
------------
Net Assets ............................................................................... $ 2,415,231
============
Net Asset Value, offering and redemption price per share:
($2,415,231,395 divided by 2,415,191,724 shares of $.001 par value
shares of beneficial interest outstanding) ......................................... $ 1.00
============
</TABLE>
See the accompanying notes which are an integral part of the financial
statements.
14 Annual Report
<PAGE>
SSgA
Prime Money Market Fund
Statement of Operations
Amounts in thousands For the Fiscal Year Ended August 31, 1999
Investment Income
Interest ........................................................ $ 138,709
Expenses
Advisory fees .................................... $ 4,030
Administrative fees .............................. 835
Custodian fees ................................... 475
Distribution fees ................................ 673
Transfer agent fees .............................. 155
Professional fees ................................ 36
Registration fees ................................ 108
Shareholder servicing fees ....................... 672
Trustees' fees ................................... 51
Amortization of deferred organization expenses ... 3
Miscellaneous .................................... 66
----------
Expenses before reductions ....................... 7,104
Expense reductions ............................... (1,730)
----------
Expenses, net ................................................ 5,374
----------
Net investment income .............................................. 133,335
Net Realized Gain (Loss)
Net realized gain (loss) on investments ............................ 58
----------
Net increase in net assets resulting from operations ............... $ 133,393
==========
See the accompanying notes which are an integral part of the financial
statements.
Annual Report 15
<PAGE>
SSgA
Prime Money Market Fund
Statement of Changes in Net Assets
Amounts in thousands For the Fiscal Years Ended August 31,
<TABLE>
<CAPTION>
1999 1998
------------- -------------
<S> <C> <C>
Increase (Decrease) in Net Assets
Operations
Net investment income .......................................... $ 133,335 $ 94,592
Net realized gain (loss) ....................................... 58 38
------------- -------------
Net increase in net assets resulting from operations ........ 133,393 94,630
------------- -------------
Distributions
From net investment income ..................................... (133,335) (94,592)
------------- -------------
Share Transactions
Net increase (decrease) in net assets from share transactions .. 290,153 718,719
------------- -------------
Total Net Increase (Decrease) in Net Assets ....................... 290,211 718,757
Net Assets
Beginning of period ............................................ 2,125,020 1,406,263
------------- -------------
End of period .................................................. $ 2,415,231 $ 2,125,020
============= =============
</TABLE>
See the accompanying notes which are an integral part of the financial
statements.
16 Annual Report
<PAGE>
SSgA
Prime Money Market Fund
Financial Highlights
The following table includes selected data for a share outstanding throughout
each period and other performance information derived from the financial
statements.
<TABLE>
<CAPTION>
Fiscal Years Ended August 31,
------------------------------------------------------------------
1999 1998 1997 1996 1995
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period .............. $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000
---------- ---------- ---------- ---------- ----------
Income From Operations
Net investment income .......................... .0496 .0544 .0528 .0546 .0567
---------- ---------- ---------- ---------- ----------
Distributions
From net investment income ..................... (.0496) (.0544) (.0528) (.0546) (.0567)
---------- ---------- ---------- ---------- ----------
Net Asset Value, End of Period .................... $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000
========== ========== ========== ========== ==========
Total Return (%) .................................. 5.08 5.63 5.52 5.60 5.82
Ratios/Supplemental Data:
Net Assets, end of period ($ in thousands) ..... 2,415,231 2,125,020 1,406,263 1,095,631 1,076,630
Ratios to average net assets (%):
Operating expenses, net (a) ................. .20 .20 .20 .20 .14
Operating expenses, gross (a) ............... .26 .28 .28 .25 .27
Net investment income ....................... 4.96 5.48 5.40 5.44 5.76
</TABLE>
(a) See Note 4 for current period amounts.
Annual Report 17
<PAGE>
SSgA
Prime Money Market Fund
Notes to Financial Statements
August 31, 1999
1. Organization
The SSgA Funds (the "Investment Company") is a series mutual fund,
currently comprised of 23 investment portfolios which are in operation as
of August 31, 1999. These financial statements report on one portfolio,
the SSgA Prime Money Market Fund (the "Fund"). The Investment Company is a
registered and diversified open-end investment company, as defined in the
Investment Company Act of 1940, as amended (the "1940 Act"), that was
organized as a Massachusetts business trust on October 3, 1987 and
operates under a First Amended and Restated Master Trust Agreement, dated
October 13, 1993, as amended (the "Agreement"). The Investment Company's
Agreement permits the Board of Trustees to issue an unlimited number of
full and fractional shares of beneficial interest at a $.001 par value.
2. Significant Accounting Policies
The Fund's financial statements are prepared in accordance with generally
accepted accounting principles which require the use of management
estimates. The following is a summary of the significant accounting
policies consistently followed by the Fund in the preparation of its
financial statements.
Security valuation: The Fund utilizes the amortized cost valuation method
in accordance with Rule 2a-7 of the 1940 Act, a method by which each
portfolio instrument is initially valued at cost, and thereafter a
constant accretion/amortization to maturity of any discount or premium is
assumed.
Securities transactions: Securities transactions are recorded daily on the
trade date, which in most instances is the same as the settlement date.
Realized gains and losses from the securities transactions, if any, are
recorded on the basis of identified cost.
Investment income: Interest income is recorded daily on the accrual basis.
Federal income taxes: Since the Investment Company is a Massachusetts
business trust, each fund is a separate corporate taxpayer and determines
its net investment income and capital gains (or losses) and the amounts to
be distributed to each funds' shareholders without regard to the income
and capital gains (or losses) of the other funds.
It is the Fund's intention to qualify as a regulated investment company,
as defined by the Internal Revenue Code of 1986, as amended. This requires
the Fund to distribute all of its taxable income. Therefore, the Fund paid
no federal income taxes and no federal income tax provision was required.
Dividends and distributions to shareholders: The Fund declares and records
dividends on net investment income daily and pays them monthly. Capital
gain distributions, if any, are generally declared and paid annually. An
additional distribution may be paid by the Fund to avoid imposition of
federal income tax on any remaining undistributed net investment income
and capital gains. The Fund may periodically make reclassifications among
certain of its capital accounts without impacting net asset value for
differences between federal tax regulations and generally accepted
accounting principles.
Expenses: Most expenses can be directly attributed to the Fund. Expenses
which cannot be directly attributed are allocated among all funds based
principally on their relative net assets.
18 Annual Report
<PAGE>
SSgA
Prime Money Market Fund
Notes to Financial Statements, continued
August 31, 1999
3. Securities Transactions
Investment transactions: For the year ended August 31, 1999, purchases,
sales, and maturities of investment securities, excluding US Government
and Agency obligations and repurchase agreements, for the Fund aggregated
to $98,459,444,383, $1,003,883,760, and $97,054,737,631, respectively.
For the year ended August 31, 1999, purchases, sales and maturities of US
Government and Agency obligations, excluding repurchase agreements
aggregated to $501,721,628, $263,320,714, and $190,000,000, respectively.
4. Related Parties
Adviser: The Investment Company has investment advisory agreements with
State Street Bank and Trust Company under which the Adviser directs the
investments of the Fund in accordance with its investment objectives,
policies, and limitations. For these services, the Fund pays a fee to the
Adviser, calculated daily and paid monthly, at the annual rates of .15%,
of its average daily net assets. The Adviser voluntarily agreed to
reimburse the Fund for all expenses in excess of .20% of its average daily
net assets on an annual basis. As of August 31, 1999, the receivable due
from the Adviser for expenses in excess of the expense cap has been netted
against the Advisory fee payable. The Investment Company also has
contracts with the Adviser to provide custody, shareholder servicing and
transfer agent services to the Fund. These amounts are presented in the
accompanying Statement of Operations.
In addition, the Fund has entered into arrangements with its Adviser
whereby credits realized as a result of uninvested cash balances were used
to reduce a portion of the Fund's expenses. During the period, the Fund's
custodian fees were reduced by $60,814 under these arrangements.
Administrator: The Investment Company has an administration agreement with
Frank Russell Investment Management Company (the "Administrator"), a
wholly owned subsidiary of The Northwestern Mutual Life Insurance Company,
under which the Administrator supervises all non-portfolio investment
aspects of the Investment Company's operations and provides adequate
office space and all necessary office equipment and services, including
telephone service, utilities, stationery supplies, and similar items. The
Investment Company pays the Administrator the following fees for services
supplied by the Administrator pursuant to the Administration Agreement:
(i) an annual fee, payable monthly on a pro rata basis, based on the
following percentages of the average daily net assets of all domestic
funds: $0 up to and including $500 million - .06%; over $500 million to
and including $1 billion - .05%; over $1 billion - .03%, and (ii) less an
amount equal to the sum of certain distribution-related expenses incurred
by the Investment Company's Distributor on behalf of the Fund (up to a
maximum of 10%, for the period September 1, 1997 to December 31, 1997, up
to a maximum of 5%, for the period January 1, 1998 to December 31, 1998
and 0% thereafter, of the asset-based fee determined in (i)). In addition,
the Fund reimburses the Administrator for out-of-pocket expenses and
start-up costs for new funds.
Annual Report 19
<PAGE>
SSgA
Prime Money Market Fund
Notes to Financial Statements, continued
August 31, 1999
Distributor and Shareholder Servicing: The Investment Company has a
Distribution Agreement with Russell Fund Distributors (the "Distributor")
which is a wholly-owned subsidiary of the Administrator to promote and
offer shares of the Investment Company. The Distributor may enter into
sub-distribution agreements with other non-related parties. The amounts
paid to the Distributor are included in the accompanying Statement of
Operations.
The Investment Company has a Distribution Plan pursuant to Rule 12b-1 (the
"Plan") under the 1940 Act. Under this Plan, the Investment Company is
authorized to make payments to the Distributor, or any Shareholder
Servicing Agent, as defined in the Plan, for providing distribution and
marketing services, for furnishing assistance to investors on an ongoing
basis, and for the reimbursement of direct out-of-pocket expenses charged
by the Distributor in connection with the distribution and marketing of
shares of the Investment Company and the servicing of investor accounts.
The Fund has service agreements with the Adviser. For these services, the
Fund pays .025% to the Adviser, based upon the average daily value of all
Fund shares held. For the year ended August 31, 1999, the Fund was charged
shareholder servicing expenses of $671,730 by the Adviser.
The combined distribution and shareholder servicing payments shall not
exceed .25% of the average daily value of net assets on an annual basis.
The shareholder servicing payments shall not exceed .20% of the average
daily value of net assets on an annual basis. Any payments that exceed the
maximum amount of allowable reimbursement may be carried forward for two
years following the year in which the expenditure was incurred so long as
the plan is in effect. The Fund's responsibility for any such expenses
carried forward shall terminate at the end of two years following the year
in which the expenditure was incurred. The Trustees or a majority of the
Fund's shareholders have the right, however, to terminate the Distribution
Plan and all payments thereunder at any time. The Fund will not be
obligated to reimburse the Distributor for carryover expenses subsequent
to the Distribution Plan's termination or noncontinuance. There were no
carryover expenses as of August 31, 1999.
Board of Trustees: Through May 31, 1999, the Investment Company paid each
Trustee not affiliated with the Investment Company a retainer of $48,000
annually, $1,500 for each board meeting attended, an additional $1,500 for
attending the annual audit committee meeting, and reimbursement for
out-of-pocket expenses. As of June 1, 1999, each Trustee receives $2,500
for each board meeting attended, an additional $2,500 for attending the
annual audit committee meeting and $2,500 for the valuation committee fee
in addition to the $48,000 annual retainer. These expenses are allocated
among all of the Funds based upon their relative net assets.
Accrued fees payable to affiliates and trustees as of August 31, 1999 were
as follows:
Advisory fees $418,643
Administration fees 76,991
Custodian fees 44,437
Distribution fees 47,455
Shareholder servicing fees 58,433
Transfer agent fees 24,868
Trustees' fees 2,473
--------
$673,300
========
20 Annual Report
<PAGE>
SSgA
Prime Money Market Fund
Notes to Financial Statements, continued
August 31, 1999
Beneficial Interest: As of August 31, 1999, two shareholders (who were
also affiliates of the Investment Company) were record owners of
approximately 43% and 16%, respectively, of the total outstanding shares
of the Fund.
5. Fund Share Transactions (On a Constant Dollar Basis):
<TABLE>
<CAPTION>
(amounts in thousands)
Fiscal Years Ended August 31,
-----------------------------
1999 1998
----------- -----------
<S> <C> <C>
Proceeds from shares sold ...................... 44,635,015 29,224,823
Proceeds from reinvestment of distributions .... 117,035 77,726
Payments for shares redeemed ................... (44,461,897) (28,583,830)
----------- -----------
Total net increase (decrease) .................. 290,153 718,719
=========== ===========
</TABLE>
Annual Report 21
<PAGE>
SSgA Prime Money Market Fund
One International Place, 27th Floor
Boston, Massachusetts 02110
(800) 997-7327
- --------------------------------------------------------------------------------
Trustees
Lynn L. Anderson, Chairman
William L. Marshall
Steven J. Mastrovich
Patrick J. Riley
Richard D. Shirk
Bruce D. Taber
Henry W. Todd
Officers
Lynn L. Anderson, President, Treasurer and CEO
Mark E. Swanson, Assistant Secretary, Assistant
Treasurer and Principal Accounting Officer
J. David Griswold, Vice President and Secretary
Deedra S. Walkey, Assistant Secretary
Rick J. Chase, Assistant Secretary
Carla L. Anderson, Assistant Secretary
Investment Adviser
State Street Bank and Trust Company
225 Franklin Street
Boston, Massachusetts 02110
Custodian, Transfer Agent and
Office of Shareholder Inquiries
State Street Bank and Trust Company
1776 Heritage Drive
North Quincy, Massachusetts 02171
(800) 647-7327
Distributor
Russell Fund Distributors, Inc.
One International Place, 27th Floor
Boston, Massachusetts 02110
(800) 997-7327
Administrator
Frank Russell Investment Management Company
909 A Street
Tacoma, Washington 98402
Legal Counsel
Goodwin, Procter & Hoar LLP
Exchange Place
Boston, Massachusetts 02109
Independent Accountants
PricewaterhouseCoopers LLP
160 Federal Street
Boston, Massachusetts 02110
22 Annual Report
<PAGE>
SSgA(R) Funds
Small Cap Fund
Annual Report
August 31, 1999
Table of Contents
Page
Chairman's Letter..................................................... 4
Portfolio Management Discussion and Analysis.......................... 6
Report of Independent Accountants..................................... 8
Financial Statements.................................................. 9
Financial Highlights.................................................. 16
Notes to Financial Statements......................................... 17
Tax Information....................................................... 23
Fund Management and Service Providers................................. 24
"SSgA(R)" is a registered trademark of State Street Corporation and is licensed
for use by the SSgA Funds.
This report is prepared from the books and records of the Fund and it is
submitted for the general information of shareholders. This information is for
distribution to prospective investors only when preceded or accompanied by a
SSgA Funds Prospectus containing more complete information concerning the
investment objective and operations of the Fund, charges and expenses. The
Prospectus should be read carefully before an investment is made.
Performance is historical and assumes reinvestment of all dividends and capital
gains. Investment return and principal value will fluctuate so that an
investor's shares, when redeemed, may be worth more or less than when purchased.
Past performance is not indicative of future results. Russell Fund Distributors,
Inc., is the distributor of the SSgA Funds.
<PAGE>
SSgA Small Cap Fund
- --------------------------------------------------------------------------------
Letter From the Chairman of State Street Global Advisors
- --------------------------------------------------------------------------------
Dear Shareholders,
It is my pleasure to provide you with the SSgA Funds annual report for the
fiscal year ended August 31, 1999. The SSgA Fund family has grown to include
twenty-three portfolios covering a broad range of investment strategies. The
enclosed information provides an overview of the investment process for the SSgA
Small Cap Fund. This overview contains market updates, performance, and
financial information for the Fund. I hope you will find this information a
useful reference as you review your investment strategy.
During the past fiscal year, the SSgA Fund family has opened two new Funds. The
names and investment objectives for these funds are as follows:
The SSgA Aggressive Equity Fund seeks to maximize total return through investing
in US equity securities that are undervalued relative to their growth potential
as measured by SSgA's proprietary models.
The SSgA IAM Shares Fund seeks to maximize total return by investing primarily
in equity securities of companies that have entered into collective bargaining
agreements with the International Association of Machinists and Aerospace
Workers or affiliated labor unions.
Additionally, three SSgA Funds achieved a five-year track record during the 1999
fiscal year. These funds include the two institutional money market funds, SSgA
US Treasury and SSgA Prime Money Market Funds and the SSgA Emerging Markets
Fund. We are proud of our long-term record and look forward to having additional
funds complete their five-year anniversary.
In today's complex global marketplace, we are continually researching new
products and ideas to introduce to our fund family. Here at SSgA, we are
committed to providing a wide range of competitive investment vehicles to
fulfill your investment needs.
I would like to thank you for choosing the SSgA Funds.
Sincerely,
/s/ Nicholas A. Lopardo
Nicholas A. Lopardo
State Street Global Advisors
Chairman and Chief Executive Officer
4 Annual Report
<PAGE>
SSgA Small Cap Fund
- --------------------------------------------------------------------------------
Management of the Funds
- --------------------------------------------------------------------------------
[PHOTO]
Nicholas A. Lopardo
Chairman and Chief Executive Officer
A Team Approach to Investment Management
Our investment strategies are the product of the combined experience of our
professional staff. Portfolio Managers work together to develop and enhance the
techniques that drive our investment processes. As a result, the portfolios we
manage benefit from the knowledge of the entire team.
Ms. Jennifer Bardsley, Principal, has been the portfolio manager primarily
responsible for investment decisions regarding the SSgA Small Cap Fund since
December 1998. As a member of the US Active Equities team, she developed the
Special Small Cap strategy. Ms. Bardsley joined SSgA as a member of the
Investment Systems group and moved into the US Active Equities Group in January
1996. Ms. Bardsley holds a BA in Economics and Russian from Middlebury College
and an MS in Computer Science from Boston College. There are seven other
portfolio managers working with Ms. Bardsley.
Annual Report 5
<PAGE>
SSgA Small Cap Fund
- --------------------------------------------------------------------------------
Portfolio Management Discussion and Analysis
- --------------------------------------------------------------------------------
Objective: The Fund seeks to maximize total return through investments in equity
securities.
Invests in: At least 65% of the total assets will be invested in smaller
capitalization securities.
Strategy: The Fund management team uses a systematic investment approach,
designed to uncover equity securities which are undervalued, with superior
growth potential. Aside from improving earnings estimates and attractive
valuations relative to their industry peers, the investment process also
evaluates a stock's historical price relationship relative to the Index, in
order to optimize an entry point when buying securities. At the close of first
quarter 1999, we also integrated a proprietary cash flow measure into our stock
evaluation process. This process is designed to address earnings manipulation by
management, which reduces the effectiveness of price-to-earnings analysis. This
factor further diversifies the investment process, resulting in optimum
performance across capital markets environments.
- --------------------------------------------------------------------------------
GROWTH OF A $10,000 INVESTMENT
Dates Small Cap Fund S&P 400 Midcap Index Russell 2000 Index
Inception* $10,000 $10,000 $10,000
1992 $10,090 $10,245 $10,055
1993 $12,478 $12,751 $13,321
1994 $12,964 $13,341 $14,111
1995 $16,859 $16,077 $17,045
1996 $20,760 $17,988 $18,890
1997 $28,202 $24,693 $24,359
1998 $21,906 $22,376 $19,634
1999 $24,393 $31,698 $25,212
================================================================================
Performance Review
For the fiscal year ended August 31, 1999, the SSgA Small Cap Fund gained
11.35%, versus the Russell 2000(R) Index return of 28.36%. The Fund's
performance is net of operating expenses, whereas Index results do not include
expenses of any kind. The bulk of this underperformance was due to first quarter
1999 returns, which were primarily a result of a very narrow breadth in the
equity market, extreme volatility among small cap stocks, and the powerful
returns of Internet related stocks, in which the Fund was underweight. As the
nature of the Manager's investment process hinges on favorable valuations on an
industry-relative basis, this did not warrant taking benchmark-relative
overweight positions in Internet issues, given the extreme valuations and lack
of sound capital structures of stocks with ".com" included in the name. The
Manager's attention to traditional valuation hindered the Fund in the first
quarter of 1999, where underperformers included General Cable, First American
Financial, and CHS Electronics. Because the companies with strong performance
- --------------------------------------------------------------------------------
SSgA Small Cap Fund
- --------------------------------------------------------------------------------
Period Ended Growth of Total
08/31/99 $10,000 Return
- -------------- ------------ -------
1 Year $ 11,135 11.35%
5 Years $ 18,819 13.48%+
Inception $ 24,393 13.25%+
- --------------------------------------------------------------------------------
Standard & Poor's(R) MidCap 400 Index
- --------------------------------------------------------------------------------
Period Ended Growth of Total
08/31/99 $10,000 Return
- -------------- ------------ -------
1 Year $ 14,158 41.58%
5 Years $ 23,746 18.88%+
Inception $ 31,698 17.46%+
- --------------------------------------------------------------------------------
Russell 2000(R) Index
- --------------------------------------------------------------------------------
Period Ended Growth of Total
08/31/99 $10,000 Return
- -------------- ------------ -------
1 Year $ 12,836 28.36%
5 Years $ 17,859 12.30%+
Inception $ 25,212 13.77%+
See related Notes on the following page.
6 Annual Report
<PAGE>
SSgA Small Cap Fund
- --------------------------------------------------------------------------------
Portfolio Management Discussion and Analysis
- --------------------------------------------------------------------------------
relative to the benchmark were also those with low to no earnings, the result
was extreme price-to-earnings ratios. In June, small caps began to trade on
fundamentals and less on pure momentum, assisting the Fund, as its strategy
performs better in such an environment.
The Fund's objective and associated investment approach rests on the employment
of a modeling process which evaluates vast amounts of financial data and
corporate earnings forecasts. This structured and disciplined approach seeks to
provide long-term total returns in excess of the Russell 2000 Index, through
bottom-up stock selection within a risk controlled framework.
To meet this strategic objective, the Manager's investment process combines
proven stock selection capability with a refined, proprietary portfolio
construction methodology. The Manager seeks to control and diversify the active
exposures in the Fund relative to the Russell 2000 Index. This is accomplished
by controlling sector and industry weights, stock-specific weights, market
capitalization, beta, and yield of the portfolio. Additionally, individual
security specific weights are controlled relative to the benchmark weight.
Market and Portfolio Highlights
The long suffering small cap market returned to favor in 1999, as small cap
stocks rallied in the second quarter of 1999. As of August 31, 1999, the Russell
2000 Index has returned 28.36% for twelve months versus 39.84% for the S&P
500(R) Index over the same period. To compare, at December 31, 1998, the twelve
month return for the Russell 2000 was -2.6% versus a gain of 28.6% for the S&P
500, demonstrating the degree of the small cap recovery in 1999. Investors
turned to smaller cap issues at mid-year 1999, due in part to the attractive
valuations of this segment of the US equity market. The protracted bull market
continues, albeit the real beneficiaries have been the largest of the US large
cap stocks. Currently, smaller cap issues have more attractive price to book
ratios (5.2 for Russell 2000 versus 9.1 for S&P 500), historical sales growth
(34% for Russell 2000 versus 17%), as well as price to earnings rations (15.5
versus 25.6). Small cap issues are currently strong merger and acquisition
plays, and in the case of an economic slowdown, lead the equity markets to
recovery.
The Manager believes the Small Cap Fund, through employing a security evaluation
method which uses multiple perspectives, will add strong returns relative to the
Russell 2000 Index over time. A core small cap approach does not expose the
portfolio to any one style cycle, but allows for broad diversification across
all economic sectors.
At the end of the fiscal year, the SSgA Small Cap Fund held 161 stocks, with an
average weighted market capitalization of $1.14 billion. The Fund has portfolio
characteristics in line with the Russell 2000 Index due to the risk-controlled
nature of the investment process. As the Fund's objective is achieved through
stock selection with a disciplined investment approach, the Fund will be fully
invested at all times.
- --------------------------------------------------------
Top Ten Equity Holdings
(as a percent of Total Investments) August 31, 1999
- --------------------------------------------------------
IDEC Pharmaceuticals Corp. 1.9%
Radian Group, Inc. 1.6
Western Wireless Corp. NPV Class A 1.5
Lattice Semiconductor Corp. 1.5
CommScope, Inc. 1.5
Calpine Corp. 1.3
Apria Healthcare Group, Inc. 1.3
Brinker International, Inc. 1.3
Briggs & Stratton Corp. 1.3
American Management Systems, Inc. 1.3
- --------------------------------------------------------
---------------------
Notes: The following notes relate to the Growth of $10,000 graph and table on
the preceding page.
* The Fund commenced operations on July 1, 1992. Index comparison also began
July 1, 1992.
** The Standard & Poor's(R) MidCap 400 Index is comprised of 400 domestic stocks
chosen for market size, liquidity and industry group representation. It is a
market-weighted index (stock price times shares outstanding), with each stock
affecting the Index in proportion to its market value.
+ The Russell 2000(R) Index is comprised of the 2,000 smallest securities in
the Russell 3000(R) Index, representing approximately 10% of the Russell 3000
total market capitalization. The Index is reconstituted annually.
+ Annualized.
Performance is historical and assumes reinvestment of all dividends and capital
gains. Investment return and principal value will fluctuate so that an
investor's shares, when redeemed, may be worth more or less than when purchased.
Past performance is not indicative of future results.
Annual Report 7
<PAGE>
Report of Independent Accountants
To the Shareholders and Board of Trustees
of the SSgA Funds:
In our opinion, the accompanying statement of assets and liabilities and
statement of net assets, and the related statements of operations and of changes
in net assets and the financial highlights present fairly, in all material
respects, the financial position of SSgA Small Cap Fund (the "Fund") at August
31, 1999, the results of its operations for the fiscal year then ended and the
changes in its net assets for each of the two fiscal years in the period then
ended, and the financial highlights for each of the five fiscal years in the
period then ended, in conformity with generally accepted accounting principles.
These financial statements and financial highlights (hereafter referred to as
"financial statements") are the responsibility of the Fund's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in accordance
with generally accepted auditing standards which require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits, which included confirmation of securities at August
31, 1999 by correspondence with the custodian and brokers, provide a reasonable
basis for the opinion expressed above.
Boston, Massachusetts
October 11, 1999
/s/ PricewaterhouseCoopers LLP
8 Annual Report
<PAGE>
SSgA
Small Cap Fund
Statement of Net Assets
August 31, 1999
Market
Number Value
of (000)
Shares $
------ ------
Common Stocks - 99.0%
Basic Industries - 3.0%
ARMCO, Inc. (a) 279,900 1,924
Hanna (M.A.) Co. 28,300 387
Ryerson Tull, Inc. 25,900 490
W.R. Grace & Co. (a) 208,000 3,978
Waters Corp. (a) 55,400 3,654
-------
10,433
-------
Capital Goods - 7.5%
Briggs & Stratton Corp. 73,700 4,486
CommScope, Inc. (a) 148,000 5,097
D.R. Horton, Inc. 211,500 3,080
JLG Industries, Inc. 61,500 1,092
Kent Electronics Corp. (a) 97,100 1,645
Manitowoc Co., Inc. 81,612 3,025
Plantronics, Inc. (a) 27,000 1,367
Roper Industries, Inc. 38,100 1,364
Superior TeleCom, Inc. 78,350 2,062
Terex Corp. (a) 117,500 3,157
-------
26,375
-------
Consumer Basics - 11.6%
Advance Paradigm, Inc. (a) 35,300 1,818
Alpharma, Inc. Class A 124,900 4,231
AmeriSource Health Corp.
Class A (a) 142,600 3,681
Apria Healthcare Group, Inc. (a) 277,100 4,676
Barr Laboratories, Inc. (a) 102,100 3,522
Bindley Western Industries, Inc. 27,777 465
IDEC Pharmaceuticals Corp. (a) 53,800 6,833
Liposome Co., Inc. (a) 42,000 827
Medicis Pharmaceutical Corp.
Class A (c) 136,250 3,713
NBTY, Inc. (a) 1,300 11
Priority Healthcare Corp.
Class B (a) 59,628 1,677
Renal Care Group, Inc. (a) 66,900 1,275
ResMed, Inc. (a) 60,700 1,684
Smithfield Foods, Inc. (a) 127,900 3,773
Trigon Healthcare, Inc. (a) 74,800 2,716
-------
40,902
-------
Consumer Durables - 3.2%
Carlisle Cos., Inc. 19,100 764
Furniture Brands
International, Inc. (a) 139,400 2,797
La-Z-Boy Inc. 66,800 1,465
Linens 'N Things, Inc. (a) 86,100 2,949
Monaco Coach Corp. (a) 33,400 969
Tower Automotive, Inc. (a) 111,900 2,238
-------
11,182
-------
Consumer Non-Durables - 6.0%
Action Performance
Companies, Inc. (a) 59,200 1,458
American Eagle Outfitters, Inc.
NPV (a) 32,000 1,256
Canandaigua Brands Inc.
Class A (a) 46,700 2,694
Cost Plus, Inc. (a) 36,500 1,615
Department 56, Inc. (a) 70,000 1,960
Footstar, Inc. (a) 48,400 1,573
Mohawk Industries, Inc. (a) 98,200 2,222
Musicland Stores Corp. (a) 281,000 2,389
Ross Stores, Inc. 21,400 889
Talbots, Inc. 37,900 1,173
Zale Corp. (a) 111,700 3,874
-------
21,103
-------
Consumer Services - 3.9%
Argosy Gaming Co. (a) 135,100 1,832
Brinker International, Inc. (a) 187,100 4,490
CEC Entertainment, Inc. (a) 82,500 2,300
Foodmaker, Inc. (a) 70,900 1,635
Midwest Express Holdings, Inc. (a) 47,750 1,289
Annual Report 9
<PAGE>
SSgA
Small Cap Fund
Statement of Net Assets, continued
August 31, 1999
Market
Number Value
of (000)
Shares $
------ ------
Ruby Tuesday, Inc. 41,100 745
Sonic Corp. (a) 43,700 1,336
------
13,627
------
Energy - 4.3%
AGL Resources, Inc. 1,100 20
Barrett Resources Corp. (a) 76,900 2,773
Louis Dreyfus Natural
Gas Corp. (a) 23,200 508
Newfield Exploration Co. (a) 76,200 2,315
Pioneer Natural Resources Co. (a) 92,200 1,049
Santa Fe Snyder Corp. (a) 340,600 3,321
Stone Energy Corp. (a) 35,800 1,906
Tesoro Petroleum Corp. (a) 173,700 3,137
------
15,029
------
Finance - 12.9%
AmeriCredit Corp. (a) 113,500 1,454
Commerce Bancorp, Inc. 34,256 1,473
Commercial Federal Corp. 86,250 2,005
Community First Bankshares, Inc. 15,800 324
Cullen Frost Bankers, Inc. 130,200 3,401
Fidelity National Financial 150,963 2,321
Financial Security Assurance
Holdings, Ltd. 23,000 1,151
First American Financial Corp. 148,150 2,204
FirstFed Financial Corp. (a) 28,800 439
Hambrecht & Quist Group (a) 51,800 1,978
Hudson United Bancorp NPV 95,000 3,022
LandAmerica Financial Group, Inc. 85,400 1,975
Metris Companies, Inc. 144,332 3,978
MONY Group, Inc. (The) 32,900 926
Nationwide Financial Services, Inc.
Class A 86,400 3,154
NCO Group, Inc. NPV (a) 39,000 1,767
Radian Group, Inc. 118,800 5,502
Riggs National Corp. 18,400 343
Roslyn Bancorp, Inc. 160,800 2,724
Trustmark Corp. 84,200 1,937
Washington Federal, Inc. 56,400 1,347
Webster Financial Corp. 79,900 2,147
------
45,572
------
General Business - 6.8%
Acclaim Entertainment, Inc. (a) 620,500 4,382
Advo Systems, Inc. (a) 138,100 2,710
Computer Task Group, Inc. 92,400 1,548
Interim Services, Inc. (a) 118,800 2,190
Lason, Inc. (a) 66,600 3,009
PairGain Technologies, Inc. (a) 133,000 1,380
Personnel Group
of America, Inc. (a) 135,700 1,136
United Stationers, Inc. (a) 166,900 3,777
Valassis Communications, Inc. (a) 85,650 3,748
------
23,880
------
Miscellaneous - 7.4%
Camden Property Trust 68,900 1,912
CareMatrix Corp. (a) 38,900 315
CBL & Associates Properties, Inc. 74,800 1,861
Essex Property Trust, Inc. REIT 8,400 295
First Industrial Realty Trust, Inc.
REIT 89,500 2,293
General Growth Properties, Inc. 51,400 1,709
Geon Co. 100,900 3,014
Health Care REIT, Inc. 75,400 1,517
Hospitality Properties Trust 111,000 2,983
Liberty Property Trust REIT 64,200 1,573
M.D.C. Holdings, Inc. 40,500 762
MeriStar Hospitality Corp. REIT 129,200 2,180
Mills Corp. 42,400 814
Reckson Associates Realty Corp.
REIT 118,600 2,461
Summit Properties, Inc. REIT 51,100 1,016
10 Annual Report
<PAGE>
SSgA
Small Cap Fund
Statement of Net Assets, continued
August 31, 1999
Market
Number Value
of (000)
Shares $
------ ------
TriNet Corporate Realty Trust, Inc.
REIT 54,200 1,324
------
26,029
------
Shelter - 3.9%
Centex Construction Products, Inc. 55,500 2,133
Kaufman & Broad Home Corp. 211,100 4,314
NVR, Inc. (a) 32,600 1,883
Pulte Corp. 116,100 2,685
Ryland Group, Inc. (The) 43,300 1,042
Standard Pacific Corp. 158,100 1,769
------
13,826
------
Technology - 17.9%
Affiliated Computer Services, Inc.
Class A (a) 16,800 718
Alliant Techsystems, Inc. (a) 23,500 1,716
American Management
Systems, Inc. (a) 154,800 4,431
Avant! Corp. (a) 120,900 1,693
AVT Corp. (a) 32,400 911
BroadVision, Inc. (a) 25,700 2,559
Cordant Technologies, Inc. 17,500 724
CSG Systems International, Inc. (a) 162,200 3,660
CTS Corp. 31,200 1,486
Cypress Semiconductor Corp. (a) 85,300 1,973
DII Group, Inc. (The) (a) 119,400 4,216
In Focus Systems, Inc. (a) 57,200 901
Insight Enterprises, Inc. (a) 67,700 2,048
InterVoice, Inc. (a) 131,800 1,796
Jack Henry & Assocociates, Inc. 39,800 1,294
Lam Research Corp. (a) 40,700 2,294
Lattice Semiconductor Corp. (a) 86,300 5,324
MMC Networks, Inc. (a) 57,700 1,781
NeoMagic Corp. (a) 270,300 2,171
Network Solutions, Inc. Class A (a) 12,100 695
Open Market, Inc. (a) 100,700 1,215
Optical Coating Laboratory, Inc. 11,000 836
Progress Software Corp. (a) 84,400 2,574
Proxim, Inc. (a) 62,800 3,065
Structural Dynamics
Research Corp. (a) 22,400 356
Sybase, Inc. (a) 342,000 4,275
Symantec Corp. (a) 115,200 3,449
USWeb Corp. (a) 33,000 644
Visual Networks, Inc. (a) 55,300 2,290
Xircom, Inc. (a) 46,600 1,854
------
62,949
------
Transportation - 3.0%
America West Holding Corp.
Class B (a) 221,900 4,327
M.S. Carriers, Inc. (a) 33,000 941
MotivePower Industries, Inc. (a) 51,700 640
Skywest, Inc. 69,600 1,396
USFreightways Corp. 70,600 3,424
-------
10,728
-------
Utilities - 7.6%
Calpine Corp. (a) 51,900 4,703
Dycom Industries, Inc. (a) 84,250 2,601
Idacorp, Inc. 38,500 1,206
MDU Resources Group, Inc. 67,650 1,590
Minnesota Power, Inc. 147,000 2,618
Price Communications Corp. (a) 72,870 1,498
Public Service Co. of New Mexico 82,700 1,556
RGS Energy Group, Inc. 34,000 880
United Illuminating Co. 19,000 950
Western Wireless Corp. NPV
Class A (a) 138,100 5,343
WinStar Communications, Inc. (a) 77,900 3,958
-------
26,903
-------
Total Common Stocks
(cost $354,356) 348,538
-------
Annual Report 11
<PAGE>
SSgA
Small Cap Fund
Statement of Net Assets, continued
August 31, 1999
Principal Market
Amount Value
(000) (000)
$ $
--------- -----
Short-Term Investments - 0.8%
AIM Short-Term Investment Prime
Portfolio Class A (b) 2,232 2,232
Federated Investors Prime Cash
Obligations Fund (b) 420 420
-------
Total Short-Term Investments
(cost $2,652) 2,652
-------
Total Investments - 99.8%
(identified cost $357,008) 351,190
Other Assets and Liabilities,
Net - 0.2% 823
-------
Net Assets - 100.0% 352,013
=======
(a) Nonincome-producing security.
(b) At cost, which approximates market.
Abbreviations:
NPV - No Par Value
REIT - Real Estate Investment Trust
See the accompanying notes which are an integral part of the financial
statements.
12 Annual Report
<PAGE>
SSgA
Small Cap Fund
Statement of Assets and Liabilities
Amounts in thousands (except per share amount) August 31, 1999
<TABLE>
<S> <C> <C>
Assets
Investments at market (identified cost $357,008) ........................... $351,190
Receivables:
Dividends ............................................................... 210
Investments sold ........................................................ 5,822
Fund shares sold ........................................................ 1,856
Prepaid expenses ........................................................... 17
Short-term investments held as collateral for securities loaned, at market . 42,036
--------
Total Assets ......................................................... 401,131
Liabilities
Payables:
Investments purchased .......................................... $ 5,150
Fund shares redeemed ........................................... 1,336
Accrued fees to affiliates ..................................... 596
Payable upon return of securities loaned, at market ............... 42,036
-------
Total Liabilities .................................................... 49,118
--------
Net Assets ................................................................. $352,013
========
Net Assets Consist of:
Undistributed net investment income ........................................ $238
Accumulated net realized gain (loss) ....................................... (57,859)
Unrealized appreciation (depreciation) on investments ...................... (5,818)
Shares of beneficial interest .............................................. 20
Additional paid-in capital ................................................. 415,432
--------
Net Assets ................................................................. $352,013
========
Net Asset Value, offering and redemption price per share:
($352,013,132 divided by 19,836,100 shares of $.001 par value
shares of beneficial interest outstanding) ........................... $ 17.75
========
</TABLE>
See the accompanying notes which are an integral part of the financial
statements.
Annual Report 13
<PAGE>
SSgA
Small Cap Fund
Statement of Operations
Amounts in thousands For the Fiscal Year Ended August 31, 1999
<TABLE>
<S> <C> <C>
Investment Income
Dividends ............................................................... $ 4,808
Interest ................................................................ 143
--------
Total Investment Income .............................................. 4,951
Expenses
Advisory fees ................................................. $ 2,981
Administrative fees ........................................... 124
Custodian fees ................................................ 88
Distribution fees ............................................. 357
Transfer agent fees ........................................... 207
Professional fees ............................................. 18
Registration fees ............................................. 59
Shareholder servicing fees .................................... 416
Trustees' fees ................................................ 8
Miscellaneous ................................................. 15
-------
Total Expenses ....................................................... 4,273
--------
Net investment income ...................................................... 678
--------
Net Realized and Unrealized Gain (Loss)
Net realized gain (loss) on:
Investments ................................................... (52,751)
Futures contracts ............................................. (277) (53,028)
-------
Net change in unrealized appreciation (depreciation) on investments ........ 88,963
--------
Net realized and unrealized gain (loss) .................................... 35,935
--------
Net increase (decrease) in net assets resulting from operations ............ $ 36,613
========
</TABLE>
See the accompanying notes which are an integral part of the financial
statements.
14 Annual Report
<PAGE>
SSgA
Small Cap Fund
Statement of Changes in Net Assets
Amounts in thousands For the Fiscal Years Ended August 31,
<TABLE>
<CAPTION>
1999 1998
----------- -----------
<S> <C> <C>
Increase (Decrease) in Net Assets
Operations
Net investment income ............................................... $ 678 $ 333
Net realized gain (loss) ............................................ (53,028) 2,269
Net change in unrealized appreciation (depreciation) ................ 88,963 (122,590)
--------- ---------
Net increase (decrease) in net assets resulting from operations .. 36,613 (119,988)
--------- ---------
Distributions
From net investment income .......................................... (468) (448)
From net realized gain on investments ............................... -- (10,718)
In excess of net realized gain on investments ....................... (24) (4,807)
--------- ---------
Net decrease from distributions .................................. (492) (15,973)
--------- ---------
Share Transactions
Net increase (decrease) in net assets from share transactions ....... (28,738) 330,783
--------- ---------
Total Net Increase (Decrease) in Net Assets ............................ 7,383 194,822
Net Assets
Beginning of period ................................................. 344,630 149,808
--------- ---------
End of period (including undistributed net investment income of
$238 and $22, respectively) ...................................... $ 352,013 $ 344,630
========= =========
</TABLE>
See the accompanying notes which are an integral part of the financial
statements.
Annual Report 15
<PAGE>
SSgA
Small Cap Fund
Financial Highlights
The following table includes selected data for a share outstanding throughout
each period and other performance information derived from the financial
statements.
<TABLE>
<CAPTION>
Fiscal Years Ended August 31,
------------------------------------------------------------
1999 1998 1997 1996 1995*
---------- ---------- ---------- ---------- --------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period ........ $ 15.96 $ 22.11 $ 17.44 $ 14.42 $ 11.88
---------- ---------- ---------- ---------- --------
Income From Operations
Net investment income (a) ................ .03 .02 .03 .04 .13
Net realized and unrealized gain (loss) .. 1.78 (4.54) 5.87 3.25 3.19
---------- ---------- ---------- ---------- --------
Total Income From Operations .......... 1.81 (4.52) 5.90 3.29 3.32
---------- ---------- ---------- ---------- --------
Distributions
From net investment income ............... (.02) (.04) (.01) (.07) (.15)
From net realized gain on investments .... -- (1.59) (1.22) (.20) (.63)
---------- ---------- ---------- ---------- --------
Total Distributions ................... (.02) (1.63) (1.23) (.27) (.78)
---------- ---------- ---------- ---------- --------
Net Asset Value, End of Period .............. $ 17.75 $ 15.96 $ 22.11 $ 17.44 $ 14.42
========== ========== ========== ========== ========
Total Return (%) ............................ 11.35 (22.32) 35.85 23.14 30.04
Ratios/Supplemental Data:
Net Assets, end of period ($ in thousands) 352,013 344,630 149,808 55,208 23,301
Ratios to average net assets (%):
Operating expenses, net ............... 1.07 1.04 1.00 1.00 .97
Operating expenses, gross ............. 1.07 1.04 1.09 1.18 1.58
Net investment income ................. .17 .10 .18 .26 .81
Portfolio turnover rate (%) .............. 110.82 86.13 143.79 76.85 192.88
</TABLE>
* Prior to November 22, 1994, the Fund was passively managed as the S&P
Midcap Index Fund. Effective November 23, 1994, the Fund increased the
Advisory fee from .20% to .75% of its average daily net assets.
(a) For the period subsequent to August 31, 1998, average month-end shares
outstanding were used for this calculation.
16 Annual Report
<PAGE>
SSgA
Small Cap Fund
Notes to Financial Statements
August 31, 1999
1. Organization
The SSgA Funds (the "Investment Company") is a series mutual fund,
currently comprised of 23 investment portfolios which are in operation as
of August 31, 1999. These financial statements report on one portfolio,
the SSgA Small Cap Fund (the "Fund"). The Investment Company is a
registered and diversified open-end investment company, as defined in the
Investment Company Act of 1940, as amended (the "1940 Act"), that was
organized as a Massachusetts business trust on October 3, 1987 and
operates under a First Amended and Restated Master Trust Agreement, dated
October 13, 1993, as amended (the "Agreement"). The Investment Company's
Agreement permits the Board of Trustees to issue an unlimited number of
full and fractional shares of beneficial interest at a $.001 par value.
2. Significant Accounting Policies
The Fund's financial statements are prepared in accordance with generally
accepted accounting principles which require the use of management
estimates. The following is a summary of the significant accounting
policies consistently followed by the Fund in the preparation of its
financial statements.
Security valuation: United States equity securities listed and traded
principally on any national securities exchange are valued on the basis of
the last sale price or, lacking any sale, at the closing bid price, on the
primary exchange on which the security is traded. United States
over-the-counter equities are valued on the basis of the closing bid
price.
International securities traded on a national securities exchange are
valued on the basis of the last sale price. International securities
traded over the counter are valued on the basis of the mean of bid prices.
In the absence of a last sale or mean bid price, respectively, such
securities may be valued on the basis of prices provided by a pricing
service if those prices are believed to reflect the market value of such
securities.
Money market instruments maturing within 60 days of the valuation date are
valued at amortized cost, a method by which each portfolio instrument is
initially valued at cost, and thereafter a constant accretion/amortization
to maturity of any discount or premium is assumed, unless the Board of
Trustees determines that amortized cost does not represent fair value.
The Fund may value securities for which market quotations are not readily
available at "fair value," as determined in good faith pursuant to
procedures established by the Board of Trustees.
Securities transactions: Securities transactions are recorded on a trade
date basis. Realized gains and losses from securities transactions are
recorded on the basis of identified cost.
Investment income: Dividend income is recorded on the ex-dividend date and
interest income is recorded daily on the accrual basis.
Amortization and accretion: All zero-coupon bond discounts and original
issue discounts are accreted for both tax and financial reporting
purposes. All short- and long-term market premiums/discounts are
amortized/accreted for both tax and financial reporting purposes.
Federal income taxes: Since the Investment Company is a Massachusetts
business trust, each fund is a separate corporate taxpayer and determines
its net investment income and capital gains (or losses) and the amounts to
be
Annual Report 17
<PAGE>
SSgA
Small Cap Fund
Notes to Financial Statements, continued
August 31, 1999
distributed to each fund's shareholders without regard to the income and
capital gains (or losses) of the other funds.
It is the Fund's intention to qualify as a regulated investment company,
as defined by the Internal Revenue Code of 1986, as amended. This requires
the Fund to distribute all of its taxable income. Therefore, the Fund paid
no federal income taxes and no federal income tax provision was required.
At August 31, 1999, the Fund had a net tax basis capital loss carryover of
$37,417,888 which may be applied against any realized net taxable gains in
each succeeding year or until its expiration date of August 31, 2007. As
permitted by tax regulations, the Fund intends to defer a net realized
capital loss of $20,502,864 incurred from November 1, 1998 to August 31,
1999, and treat it as arising in the fiscal year 2000.
The Fund's aggregate cost of investments and the composition of unrealized
appreciation and depreciation of investment securities for federal income
tax purposes as of August 31, 1999 are as follows:
Net
Unrealized
Federal Tax Unrealized Unrealized Appreciation
Cost Appreciation (Depreciation) (Depreciation)
------------ ----------- -------------- --------------
$357,008,554 $36,862,390 $(42,680,680) $(5,818,290)
Dividends and distributions to shareholders: Income dividends and capital
gain distributions, if any, are recorded on the ex-dividend date.
Dividends are generally declared and paid quarterly. Capital gain
distributions are generally declared and paid annually. An additional
distribution may be paid by the Fund to avoid imposition of federal income
tax on any remaining undistributed net investment income and capital
gains.
The timing and characterization of certain income and capital gain
distributions are determined in accordance with federal tax regulations
which may differ from generally accepted accounting principles ("GAAP").
As a result, net investment income and net realized gain (or loss) on
investment transactions for a reporting period may differ significantly
from distributions during such period. The differences between tax
regulations and GAAP relate primarily to investments in futures and
certain securities sold at a loss. Accordingly, the Fund may periodically
make reclassifications among certain of its capital accounts without
impacting its net asset value.
Expenses: Most expenses can be directly attributed to the Fund. Expenses
which cannot be directly attributed are allocated among all funds based
principally on their relative net assets.
Futures: The Fund utilizes exchange-traded futures contracts. The primary
risks associated with the use of futures contracts are an imperfect
correlation between the change in market value of the securities held by
the Fund and the prices of futures contracts and the possibility of an
illiquid market. Changes in initial settlement value are accounted for as
unrealized appreciation (depreciation) until the contracts are terminated,
at which time realized gains and losses are recognized.
3. Securities Transactions
Investment transactions: For the year ended August 31, 1999, purchases and
sales of investment securities, excluding short-term investments and
futures contracts, aggregated to $433,242,596 and $467,939,384,
respectively.
18 Annual Report
<PAGE>
SSgA
Small Cap Fund
Notes to Financial Statements, continued
August 31, 1999
Futures transactions: The Fund's transactions in futures contracts for the
year ended August 31, 1999 were as follows:
Futures Contracts
-------------------------
Aggregate
Number of Face Value of
Contracts Contracts (1)
--------- -------------
Outstanding at August 31, 1998 -- $ --
Contracts opened 214 47,132,145
Contracts closed (214) (47,132,145)
----- ------------
Outstanding at August 31, 1999 -- $ --
===== ============
(1) The aggregate face value of contracts is computed on the date each
contract was opened.
Securities Lending: Effective December 17, 1998, the Investment Company
started its securities lending program. The program allows each Fund to
loan securities with a value up to 33 1/3% of its total assets to certain
brokers. The Fund receives cash (U.S. currency), U.S. Government or U.S.
Government agency obligations as collateral against the loaned securities.
To the extent that a loan is secured by cash collateral, such collateral
shall be invested by State Street Bank and Trust Company in short-term
instruments, money market mutual funds, and such other short-term
investments, provided the investments meet certain quality and
diversification requirements. Under the securities lending arrangement,
the collateral received is recorded on the Fund's statement of assets and
liabilities along with the related obligation to return the collateral. In
those situations where the Company has relinquished control of securities
transferred, it derecognizes the securities and records a receivable from
the counterparty.
Income generated from the investment of cash collateral, less negotiated
rebate fees paid to participating brokers and transaction costs, is
divided between the Fund and State Street Bank and Trust Company and is
recorded as interest income for the Fund. To the extent that a loan is
secured by non-cash collateral, brokers pay the Fund negotiated lenders'
fees, which are divided between the Fund and State Street Bank and Trust
Company and are recorded as interest income for the Fund. All collateral
received will be in an amount at least equal to 102% (for loans of U.S.
securities) or 105% (for non-U.S. securities) of the market value of the
loaned securities at the inception of each loan. Should the borrower of
the securities fail financially, there is a risk of delay in recovery of
the securities or loss of rights in the collateral. Consequently, loans
are made only to borrowers which are deemed to be of good financial
standing. As of August 31, 1999, the value of outstanding securities on
loan and the value of collateral amounted to $39,911,878 and $42,035,761,
respectively. The Fund recorded securities lending income of $134,796
during the year.
4. Related Parties
Adviser: The Investment Company has an investment advisory agreement with
State Street Bank and Trust Company under which the Adviser directs the
investments of the Fund in accordance with its investment objectives,
policies, and limitations. Effective November 23, 1994, pursuant to a
shareholder vote, the Fund pays a fee to the Adviser calculated daily and
paid monthly, at an annual rate of .75% of its average daily net assets.
The
Annual Report 19
<PAGE>
SSgA
Small Cap Fund
Notes to Financial Statements, continued
August 31, 1999
Investment Company also has contracts with the Adviser to provide custody,
shareholder servicing and transfer agent services to the Fund. These
amounts are presented in the accompanying Statement of Operations.
In addition, the Fund has entered into arrangements with its Adviser
whereby credits realized as a result of uninvested cash balances were used
to reduce a portion of the Fund's expenses. During the period, the Fund's
custodian fees were reduced by $9,082 under these arrangements.
Administrator: The Investment Company has an administration agreement with
Frank Russell Investment Management Company (the "Administrator"), a
wholly owned subsidiary of The Northwestern Mutual Life Insurance Company,
under which the Administrator supervises all non-portfolio investment
aspects of the Investment Company's operations and provides adequate
office space and all necessary office equipment and services, including
telephone service, utilities, stationery supplies, and similar items. The
Investment Company pays the Administrator the following fees for services
supplied by the Administrator pursuant to the Administration Agreement:
(i) an annual fee, payable monthly on a pro rata basis, based on the
following percentages of the combined average daily net assets of all
domestic funds: $0 up to and including $500 million - .06%; over $500
million to and including $1 billion - .05%; over $1 billion - .03%, and
(ii) less an amount equal to the sum of certain distribution-related
expenses incurred by the Investment Company's Distributor on behalf of the
Fund (up to a maximum of 10% for the period September 1, 1997 to December
31, 1997, up to a maximum of 5% for the period January 1, 1998 to December
31, 1998 and 0% thereafter, of the asset-based fee determined in (i)). In
addition, the Fund reimburses the Administrator for out-of-pocket expenses
and start-up costs for new funds.
Distributor and Shareholder Servicing: The Investment Company has a
Distribution Agreement with Russell Fund Distributors (the "Distributor")
which is a wholly-owned subsidiary of the Administrator to promote and
offer shares of the Investment Company. The Distributor may enter into
sub-distribution agreements with other non-related parties. The amounts
paid to the Distributor are included in the accompanying Statement of
Operations.
The Investment Company has a Distribution Plan pursuant to Rule 12b-1 (the
"Plan") under the 1940 Act. Under this Plan, the Investment Company is
authorized to make payments to the Distributor, or any Shareholder
Servicing Agent, as defined in the Plan, for providing distribution and
marketing services, for furnishing assistance to investors on an ongoing
basis, and for the reimbursement of direct out-of-pocket expenses charged
by the Distributor in connection with the distribution and marketing of
shares of the Investment Company and the servicing of investor accounts.
The Fund has service agreements with the Adviser, State Street Brokerage
Services, Inc. ("SSBSI"), a wholly-owned subsidiary of the Adviser, the
Adviser's Retirement Investment Services Division ("RIS"), the Adviser's
Metropolitan Division of Commercial Banking ("Commercial Banking") and
State Street Solutions ("Solutions")(collectively the "Agents"), as well
as several unaffiliated service providers. For these services, the Fund
pays .025%, .175%, .175%, .175% and .175% to the Adviser, SSBSI, RIS,
Commercial Banking, and Solutions, respectively, based upon the average
daily value of all Fund shares held by or for customers of these Agents.
For the year ended August 31, 1999, the Fund was charged shareholder
servicing expenses of $96,075, $5,265, $205,954, $978 and $71,179, by the
Adviser, SSBSI, RIS, Commercial Banking, and Solutions, respectively.
20 Annual Report
<PAGE>
SSgA
Small Cap Fund
Notes to Financial Statements, continued
August 31, 1999
The combined distribution and shareholder servicing payments shall not
exceed .25% of the average daily value of net assets on an annual basis.
The shareholder servicing payments shall not exceed .20% of the average
daily value of net assets on an annual basis. Any payments that exceed the
maximum amount of allowable reimbursement may be carried forward for two
years following the year in which the expenditure was incurred so long as
the plan is in effect. The Fund's responsibility for any such expenses
carried forward shall terminate at the end of two years following the year
in which the expenditure was incurred. The Trustees or a majority of the
Fund's shareholders have the right, however, to terminate the Distribution
Plan and all payments thereunder at any time. The Fund will not be
obligated to reimburse the Distributor for carryover expenses subsequent
to the Distribution Plan's termination or noncontinuance. There were no
carryover expenses as of August 31, 1999.
Affiliated Brokerage: The Fund placed a portion of its portfolio
transactions with SSBSI, an affiliated broker dealer of the Fund's
Adviser. The commissions paid to SSBSI were $68,610 for the period ended
August 31, 1999.
Board of Trustees: Through May 31, 1999, the Investment Company paid each
Trustee not affiliated with the Investment Company a retainer of $48,000
annually, $1,500 for each board meeting attended, an additional $1,500 for
attending the annual audit committee meeting, and reimbursement for
out-of-pocket expenses. As of June 1, 1999, each Trustee receives $2,500
for each board meeting attended, an additional $2,500 for attending the
annual audit committee meeting and $2,500 for the valuation committee fee
in addition to the $48,000 annual retainer. These expenses are allocated
among all of the Funds based upon their relative net assets.
Accrued fees payable to affiliates and trustees as of August 31, 1999 were
as follows:
Advisory fees $470,122
Administration fees 10,110
Custodian fees 16,655
Distribution fees 5,202
Shareholder servicing fees 51,252
Transfer agent fees 41,865
Trustees' fees 996
--------
$596,202
========
Beneficial Interest: As of August 31, 1999, two shareholders (one of which
was also an affiliate of the Investment Company) were record owners of
approximately 20% and 11%, respectively, of the total outstanding shares
of the Fund.
Annual Report 21
<PAGE>
SSgA
Small Cap Fund
Notes to Financial Statements, continued
August 31, 1999
5. Fund Share Transactions (amounts in thousands)
Fiscal Years Ended August 31,
------------------------------------------
1999 1998
------------------- -------------------
Shares Dollars Shares Dollars
------- --------- ------- ---------
Proceeds from shares sold 20,403 $ 358,555 26,193 $ 567,051
Proceeds from reinvestment
of distributions 23 405 703 15,185
Payments for shares redeemed (22,182) (387,698) (12,081) (251,453)
------- --------- ------- ---------
Total net increase (decrease) (1,756) $ (28,738) 14,815 $ 330,783
======= ========= ======= =========
6. Line of Credit
The Fund and several affiliated Funds (the "Participants") share in a $50
million revolving credit facility for temporary or emergency purposes,
including the meeting of redemption requests that otherwise might require
the untimely disposition of securities. The Participants are charged an
annual commitment fee of .09% (.065% prior to July 15, 1999) on the
average daily unused amount of the aggregate commitment, which is
allocated among each of the Participants. Interest, at the Federal Fund
Rate plus 0.50% annually, is calculated based on the market rates at the
time of the borrowing. The Fund may borrow up to a maximum of 33 1/3
percent of the value of its net assets under the agreement. The Fund did
not have any drawdowns during the year.
22 Annual Report
<PAGE>
SSgA
Small Cap Fund
Tax Information
August 31, 1999 (Unaudited)
The Fund paid distributions of $23,947 from net long-term capital gains
during its taxable year ended August 31, 1999.
Please consult a tax advisor for questions about federal or state income tax
laws.
Annual Report 23
<PAGE>
SSgA Small Cap Fund
One International Place, 27th Floor
Boston, Massachusetts 02110
(800) 997-7327
- --------------------------------------------------------------------------------
Trustees
Lynn L. Anderson, Chairman
William L. Marshall
Steven J. Mastrovich
Patrick J. Riley
Richard D. Shirk
Bruce D. Taber
Henry W. Todd
Officers
Lynn L. Anderson, President, Treasurer and CEO
Mark E. Swanson, Assistant Secretary, Assistant
Treasurer and Principal Accounting Officer
J. David Griswold, Vice President and Secretary
Deedra S. Walkey, Assistant Secretary
Rick J. Chase, Assistant Secretary
Carla L. Anderson, Assistant Secretary
Investment Adviser
State Street Bank and Trust Company
225 Franklin Street
Boston, Massachusetts 02110
Custodian, Transfer Agent and
Office of Shareholder Inquiries
State Street Bank and Trust Company
1776 Heritage Drive
North Quincy, Massachusetts 02171
(800) 647-7327
Distributor
Russell Fund Distributors, Inc.
One International Place, 27th Floor
Boston, Massachusetts 02110
(800) 997-7327
Administrator
Frank Russell Investment Management Company
909 A Street
Tacoma, Washington 98402
Legal Counsel
Goodwin, Procter & Hoar LLP
Exchange Place
Boston, Massachusetts 02109
Independent Accountants
PricewaterhouseCoopers LLP
160 Federal Street
Boston, Massachusetts 02110
24 Annual Report
<PAGE>
SSgA(R) Funds
US Treasury Money Market Fund
Annual Report
August 31, 1999
Table of Contents
Page
Chairman's Letter............................................ 4
Portfolio Management Discussion and Analysis................. 6
Report of Independent Accountants............................ 8
Financial Statements......................................... 9
Financial Highlights......................................... 14
Notes to Financial Statements................................ 15
Fund Management and Service Providers........................ 19
"SSgA(R)" is a registered trademark of State Street Corporation and is licensed
for use by the SSgA Funds.
This report is prepared from the books and records of the Fund and it is
submitted for the general information of shareholders. This information is for
distribution to prospective investors only when preceded or accompanied by a
SSgA Funds Prospectus containing more complete information concerning the
investment objective and operations of the Fund, charges and expenses. The
Prospectus should be read carefully before an investment is made.
Performance is historical and assumes reinvestment of all dividends and capital
gains. Investment return and principal value will fluctuate so that an
investor's shares, when redeemed, may be worth more or less than when purchased.
Past performance is not indicative of future results. An investment in a money
market fund is neither insured nor guaranteed by the US government. There can be
no assurance that a money market fund will be able to maintain a stable net
asset value of $1.00 per share. Russell Fund Distributors, Inc., is the
distributor of the SSgA Funds.
<PAGE>
SSgA US Treasury Money Market Fund
- --------------------------------------------------------------------------------
Letter From the Chairman of State Street Global Advisors
- --------------------------------------------------------------------------------
Dear Shareholders,
It is my pleasure to provide you with the SSgA Funds annual report for the
fiscal year ended August 31, 1999. The SSgA Fund family has grown to include
twenty-three portfolios covering a broad range of investment strategies. The
enclosed information provides an overview of the investment process for the SSgA
US Treasury Money Market Fund. This overview contains market updates,
performance, and financial information for the Fund. I hope you will find this
information a useful reference as you review your investment strategy.
During the past fiscal year, the SSgA Fund family has opened two new Funds. The
names and investment objectives for these funds are as follows:
The SSgA Aggressive Equity Fund seeks to maximize total return through investing
in US equity securities that are undervalued relative to their growth potential
as measured by SSgA's proprietary models.
The SSgA IAM Shares Fund seeks to maximize total return by investing primarily
in equity securities of companies that have entered into collective bargaining
agreements with the International Association of Machinists and Aerospace
Workers or affiliated labor unions.
Additionally, three SSgA Funds achieved a five-year track record during the 1999
fiscal year. These funds include the two institutional money market funds, SSgA
US Treasury and SSgA Prime Money Market Funds and the SSgA Emerging Markets
Fund. We are proud of our long-term record and look forward to having additional
funds complete their five-year anniversary.
In today's complex global marketplace, we are continually researching new
products and ideas to introduce to our fund family. Here at SSgA, we are
committed to providing a wide range of competitive investment vehicles to
fulfill your investment needs.
I would like to thank you for choosing the SSgA Funds.
Sincerely,
/s/ Nicholas A. Lopardo
Nicholas A. Lopardo
State Street Global Advisors
Chairman and Chief Executive Officer
4 Annual Report
<PAGE>
SSgA US Treasury Money Market Fund
- --------------------------------------------------------------------------------
Management of the Funds
- --------------------------------------------------------------------------------
[PHOTO]
Nicholas A. Lopardo
Chairman and Chief Executive Officer
A Team Approach to Investment Management
Our investment strategies are the product of the combined experience of our
professional staff. Portfolio Managers work together to develop and enhance the
techniques that drive our investment processes. As a result, the portfolios we
manage benefit from the knowledge of the entire team.
Ms. Lisa Hatfield, Principal, has been the portfolio manager primarily
responsible for investment decisions regarding the SSgA US Treasury Money Market
Fund since March 1999. Ms. Hatfield has been with State Street since 1986 and
has managed several money market funds since 1987. She received a BS from
Suffolk University. There are ten other portfolio managers working with Ms.
Hatfield.
Annual Report 5
<PAGE>
SSgA US Treasury Money Market Fund
- --------------------------------------------------------------------------------
Portfolio Management Discussion and Analysis
- --------------------------------------------------------------------------------
Objective: Maximize current income while preserving capital and liquidity.
Invests in: Obligations issued, guaranteed, or backed by the US Government.
Strategy: Fund Managers base their decisions on the relative attractiveness of
different money market investments which can vary depending on the general level
of interest rates as well as supply/demand imbalances in the market.
- --------------------------------------------------------------------------------
GROWTH OF A $10,000 INVESTMENT
<TABLE>
<CAPTION>
Dates US Treasury Money Market Fund Salomon Brothers 3-Month T-Bill Index
<S> <C> <C>
Inception* $10,000 $10,000
1994 $10,251 $10,277
1995 $10,813 $10,851
1996 $11,399 $11,431
1997 $12,010 $12,031
1998 $12,675 $12,659
1999 $13,288 $13,248
</TABLE>
================================================================================
Performance Review
The Fund had a total return of 4.84% for the fiscal year ended August 31, 1999.
This compares favorably to the return of the benchmark Salomon Smith Barney
3-Month Treasury Bill Index, which gained 4.65% for the same period. The Fund's
performance is net of operating expenses, whereas Index results do not include
expenses of any kind. The Salomon Smith Barney 3-Month Treasury Bill Index was
chosen as a standard, well known representation of money market rates.
- --------------------------------------------------------------------------------
SSgA US Treasury Money Market Fund
- --------------------------------------------------------------------------------
Period Ended Growth of Total
08/31/99 $10,000 Return
- ------------------- --------------- --------
1 Year $ 10,484 4.84%
5 Years $ 12,963 5.33%+
Inception $ 13,288 5.07%+
- --------------------------------------------------------------------------------
Salomon Smith Barney 3-Month Treasury Bill Index
- --------------------------------------------------------------------------------
Period Ended Growth of Total
08/31/99 $10,000 Return
- ------------------- --------------- --------
1 Year $ 10,465 4.65%
5 Years $ 12,890 5.21%+
Inception $ 13,248 5.01%+
See related Notes on following page.
6 Annual Report
<PAGE>
SSgA US Treasury Money Market Fund
- --------------------------------------------------------------------------------
Portfolio Management Discussion and Analysis
- --------------------------------------------------------------------------------
Market and Portfolio Highlights
The year began with the Russian government defaulting on portions of its debt,
and international investors losing billions of dollars as a result. Russia's
meltdown sent tremors through Latin American economies and posed a significant
threat to Mexico, a major US trading partner. This turmoil caused a huge "flight
to quality", where US treasuries were deemed one of the only safe investments.
As treasuries rallied and credit spreads widened, it became apparent that market
participants, as well as the Fed, feared a global financial meltdown.
On September 29, 1998, the Federal Reserve Open Market Committee (FOMC) voted to
cut the Federal Funds rate by 25 basis points to 5.25%, its lowest level since
January 1996. This action was quickly followed by two more 25 basis point
easings, with the last move occurring on November 17th. The US economy remained
robust, with both low employment and low inflation, but lower rates were needed
to head off the potentially serious threat of lack of liquidity in the markets
and ultimately to continued US economic growth. The last Fed rate cut was an
insurance policy, making it clear that the world's largest Central Bank was
willing to help minimize further market contagion.
The actions by the Federal Reserve were successful in bolstering liquidity and
preserving growth. The wealth effect from real estate and stock market gains,
coupled with a historically low unemployment rate, drove confidence and spending
to record highs. GDP growth has averaged over 3% for the past two quarters,
while inflation indicators have remained markedly well behaved. Recently,
concerns of increasing asset prices, slowing productivity gains, and recovering
foreign economies across the Pacific-Rim raised concerns with the Federal
Reserve. On June 30, 1999, they opted to raise the Federal Funds rate from 4.75%
to 5.00%, and again on August 24th to 5.25%. These moves by the FOMC retract
most of last fall's easings and leaves the door open to another tightening, if
required, in the final quarter of 1999.
In the last year, the SSgA US Treasury Money Market Fund was managed
consistently with its objective of providing safety of principal and liquidity
by investing in obligations backed by the US Treasury. Treasuries continued to
be very expensive and traded at levels below the Federal Funds rate. Due to the
Manager's belief that the Fed was intent on raising interest rates, the Fund
increased its percentage of overnight Repurchase Agreements to comprise 80% of
the portfolio. Although the short end yield curved steepened slightly in
anticipation of a Fed move, overnight Repos continued to outperform the curve.
The average maturity of the Fund over the course of the year ranged between 21
and 40 days, primarily due to the Repo roll-over strategy's yield advantage over
treasury securities. When opportunities arose in the market, the Fund
selectively purchased six month securities to extend its average days to
maturity.
----------
Notes: The following notes relate to the Growth of $10,000 graph and table on
the preceding page.
* The Fund commenced operations on December 1, 1993. Index comparison also
began on December 1, 1993.
** Equal dollar amounts of 3-month Treasury bills are purchased at the
beginning of each of three consecutive months. As each bill matures, all
proceeds are rolled over or reinvested in a new 3-month bill. The income
used to calculate the monthly return is derived by subtracting the
original amount invested from the maturity value. The yield curve average
is the basis for calculating the return on the Index. The Index is
rebalanced monthly by market capitalization.
+ Annualized.
Performance is historical and assumes reinvestment of all dividends and capital
gains. Investment return and principal value will fluctuate so that an
investor's shares, when redeemed, may be worth more or less than when purchased.
Past performance is not indicative of future results.
An investment in a money market fund is neither insured nor guaranteed by the US
Government. There can be no assurance that a money market fund will be able to
maintain a stable net asset value of $1.00 per share.
Annual Report 7
<PAGE>
Report of Independent Accountants
To the Shareholders and Board of Trustees of the SSgA Funds:
In our opinion, the accompanying statement of assets and liabilities and
statement of net assets, and the related statements of operations and of changes
in net assets and the financial highlights present fairly, in all material
respects, the financial position of SSgA US Treasury Money Market Fund (the
"Fund") at August 31, 1999, the results of its operations for the fiscal year
then ended and the changes in its net assets for each of the two fiscal years in
the period then ended, and the financial highlights for each of the five fiscal
years in the period then ended, in conformity with generally accepted accounting
principles. These financial statements and financial highlights (hereafter
referred to as "financial statements") are the responsibility of the Fund's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these financial
statements in accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of securities at August 31, 1999 by correspondence with the
custodian, provide a reasonable basis for the opinion expressed above.
Boston, Massachusetts
October 11, 1999
/s/ PricewaterhouseCoopers LLP
8 Annual Report
<PAGE>
SSgA
US Treasury Money Market Fund
Statement of Net Assets
August 31, 1999
<TABLE>
<CAPTION>
Principal
Amount Date Value
(000) Rate of (000)
$ % Maturity $
--------- ----- -------- -------
<S> <C> <C> <C> <C>
United States Government Agencies - 46.7%
United States Treasury Bills ............................................. 150,000 5.195 09/15/99 149,697
United States Treasury Bills ............................................. 100,000 5.200 09/15/99 99,798
United States Treasury Notes ............................................. 25,000 5.375 01/31/00 25,061
United States Treasury Notes ............................................. 60,000 7.750 01/31/00 60,728
United States Treasury Notes ............................................. 100,000 5.500 02/29/00 100,151
United States Treasury Notes ............................................. 25,000 7.125 02/29/00 25,255
United States Treasury Notes ............................................. 10,000 5.500 03/31/00 10,031
United States Treasury Notes ............................................. 50,000 7.125 09/30/99 50,089
---------
Total United States Government Agencies (cost $520,810) ................................................ 520,810
---------
Total Investments - 46.7% (amortized cost $520,810) .................................................... 520,810
---------
Repurchase Agreements - 53.5%
Agreement with Bear Stearns & Co., Inc. of $200,000
acquired August 31, 1999 at 5.450% to be repurchased at $200,030
on September 1, 1999, collateralized by:
$313,342 various United States Treasury Obligations, valued at $203,997 ........................ 200,000
Agreement with Banc One Corp. of $40,000
acquired August 31, 1999 at 5.420% to be repurchased at $40,006 on September
1, 1999, collateralized by:
$36,720 various United States Treasury Obligations, valued at $40,810 .......................... 40,000
Agreement with CIBC Oppenheimer Corp. of $30,000
acquired August 31, 1999 at 5.450% to be repurchased at $30,005 on September
1, 1999, collateralized by:
$30,379 various United States Treasury Obligations, valued at $30,615 .......................... 30,000
Agreement with CIBC Oppenheimer Corp. of $20,000
acquired August 31, 1999 at 5.400% to be repurchased at $20,003 on September
1, 1999, collateralized by:
$20,162 various United States Treasury Obligations, valued at $20,403 .......................... 20,000
</TABLE>
Annual Report 9
<PAGE>
SSgA
US Treasury Money Market Fund
Statement of Net Assets, continued
August 31, 1999
<TABLE>
<CAPTION>
Value
(000)
$
-------
<S> <C>
Agreement with Deutsche Bank AG of $46,793
acquired August 31, 1999 at 5.400% to be repurchased at $46,800 on September
1, 1999, collateralized by:
$47,365 various United States Treasury Obligations, valued at $47,740 .......................... 46,793
Agreement with Warburg Dillon Reed, L.L.C. of $200,000
acquired August 31, 1999 at 5.440% to be repurchased at $200,030 on
September 1, 1999, collateralized by:
$191,395 various United States Treasury Obligations, valued at $203,990 ........................ 200,000
Agreement with Warburg Dillon Reed, L.L.C. of $60,000
acquired August 31, 1999 at 5.450% to be repurchased at $60,009 on September
1, 1999, collateralized by:
$57,737 various United States Treasury Obligations, valued at $61,186 .......................... 60,000
---------
Total Repurchase Agreements (identified cost $596,793) ................................................. 596,793
Total Investments and Repurchase Agreements - 100.2% (cost $1,117,603)(a) .............................. 1,117,603
Other Assets and Liabilities, Net - (0.2%) ............................................................. (1,989)
---------
Net Assets - 100.0% .................................................................................... 1,115,614
=========
</TABLE>
(a) The identified cost for federal income tax purposes is the same as shown
above.
See the accompanying notes which are an integral part of the financial
statements.
10 Annual Report
<PAGE>
SSgA
US Treasury Money Market Fund
Statement of Assets and Liabilities
Amounts in thousands (except per share amount) August 31, 1999
<TABLE>
<S> <C> <C>
Assets
Investments at amortized cost which approximates market ........................ $ 520,810
Repurchase agreements (identified cost $596,793) ............................... 596,793
Interest receivable ............................................................ 2,376
----------
Total Assets ............................................................. 1,119,979
Liabilities
Payables:
Dividends ...................................................... $ 4,085
Accrued fees to affiliates ..................................... 258
Other accrued expenses ......................................... 22
----------
Total Liabilities ........................................................ 4,365
----------
Net Assets ..................................................................... $1,115,614
==========
Net Assets Consist of:
Accumulated net realized gain (loss) ........................................... $ 2
Shares of beneficial interest .................................................. 1,116
Additional paid-in capital ..................................................... 1,114,496
----------
Net Assets ..................................................................... $1,115,614
==========
Net Asset Value, offering and redemption price per share:
($1,115,614,071 divided by 1,115,623,697 shares of $.001 par value
shares of beneficial interest outstanding) ............................... $ 1.00
==========
</TABLE>
See the accompanying notes which are an integral part of the financial
statements.
Annual Report 11
<PAGE>
SSgA
US Treasury Money Market Fund
Statement of Operations
Amounts in thousands For the Fiscal Year Ended August 31, 1999
<TABLE>
<S> <C> <C>
Investment Income
Interest .................................................................... $ 50,699
Expenses
Advisory fees .................................................. $ 2,569
Administrative fees ............................................ 320
Custodian fees ................................................. 362
Distribution fees .............................................. 238
Transfer agent fees ............................................ 87
Professional fees .............................................. 21
Registration fees .............................................. 62
Shareholder servicing fees ..................................... 257
Trustees' fees ................................................. 20
Amortization of deferred organization expenses ................. 2
Miscellaneous .................................................. 41
----------
Expenses before reductions ..................................... 3,979
Expense reductions ............................................. (1,923)
----------
Expenses, net ............................................................ 2,056
----------
Net investment income .......................................................... 48,643
----------
Net increase in net assets resulting from operations ........................... $ 48,643
==========
</TABLE>
See the accompanying notes which are an integral part of the financial
statements.
12 Annual Report
<PAGE>
SSgA
US Treasury Money Market Fund
Statement of Changes in Net Assets
Amounts in thousands For the Fiscal Years Ended August 31,
<TABLE>
<CAPTION>
1999 1998
---------- ----------
<S> <C> <C>
Increase (Decrease) in Net Assets
Operations
Net investment income ........................................... $ 48,643 $ 56,898
Net realized gain (loss) ........................................ -- 44
---------- ----------
Net increase in net assets resulting from operations ......... 48,643 56,942
---------- ----------
Distributions
From net investment income ...................................... (48,643) (56,898)
---------- ----------
Share Transactions
Net increase (decrease) in net assets from share transactions ... 115,247 83,478
---------- ----------
Total Net Increase (Decrease) in Net Assets ........................ 115,247 83,522
Net Assets
Beginning of period ............................................. 1,000,367 916,845
---------- ----------
End of period ................................................... $1,115,614 $1,000,367
========== ==========
</TABLE>
See the accompanying notes which are an integral part of the financial
statements.
Annual Report 13
<PAGE>
SSgA
US Treasury Money Market Fund
Financial Highlights
The following table includes selected data for a share outstanding throughout
each period and other performance information derived from the financial
statements.
<TABLE>
<CAPTION>
Fiscal Years Ended August 31,
------------------------------------------------------------------
1999 1998 1997 1996 1995
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period ........ $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000
---------- ---------- ---------- ---------- ----------
Income From Operations
Net investment income .................... .0473 .0540 .0515 .0529 .0536
---------- ---------- ---------- ---------- ----------
Distributions
From net investment income ............... (.0473) (.0540) (.0515) (.0529) (.0536)
---------- ---------- ---------- ---------- ----------
Net Asset Value, End of Period .............. $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000
========== ========== ========== ========== ==========
Total Return (%) ............................ 4.84 5.53 5.36 5.42 5.48
Ratios/Supplemental Data:
Net Assets, end of period ($ in thousands) 1,115,614 1,000,367 916,845 189,004 160,893
Ratios to average net assets (%):
Operating expenses, net (a) ........... .20 .20 .20 .20 .13
Operating expenses, gross (a) ......... .39 .39 .46 .38 .39
Net investment income ................. 4.73 5.40 5.28 5.29 5.38
</TABLE>
(a) See Note 4 for current period amounts.
14 Annual Report
<PAGE>
SSgA
US Treasury Money Market Fund
Notes to Financial Statements
August 31, 1999
1. Organization
The SSgA Funds (the "Investment Company") is a series mutual fund,
currently comprised of 23 investment portfolios which are in operation as
of August 31, 1999. These financial statements report on one portfolio,
the SSgA US Treasury Money Market Fund (the "Fund"). The Investment
Company is a registered and diversified open-end investment company, as
defined in the Investment Company Act of 1940, as amended (the "1940
Act"), that was organized as a Massachusetts business trust on October 3,
1987 and operates under a First Amended and Restated Master Trust
Agreement, dated October 13, 1993, as amended (the "Agreement"). The
Investment Company's Agreement permits the Board of Trustees to issue an
unlimited number of full and fractional shares of beneficial interest at a
$.001 par value.
2. Significant Accounting Policies
The Fund's financial statements are prepared in accordance with generally
accepted accounting principles which require the use of management
estimates. The following is a summary of the significant accounting
policies consistently followed by the Fund in the preparation of its
financial statements.
Security valuation: The Fund utilizes the amortized cost valuation method
in accordance with Rule 2a-7 of the 1940 Act, a method by which each
portfolio instrument is initially valued at cost, and thereafter a
constant accretion/amortization to maturity of any discount or premium is
assumed.
Securities transactions: Securities transactions are recorded daily on the
trade date, which in most instances is the same as the settlement date.
Realized gains and losses from the securities transactions, if any, are
recorded on the basis of identified cost.
Investment income: Interest income is recorded daily on the accrual basis.
Federal income taxes: Since the Investment Company is a Massachusetts
business trust, each fund is a separate corporate taxpayer and determines
its net investment income and capital gains (or losses) and the amounts to
be distributed to each funds' shareholders without regard to the income
and capital gains (or losses) of the other funds.
It is the Fund's intention to qualify as a regulated investment company,
as defined by the Internal Revenue Code of 1986, as amended. This requires
the Fund to distribute all of its taxable income. Therefore, the Fund paid
no federal income taxes and no federal income tax provision was required.
Dividends and distributions to shareholders: The Fund declares and records
dividends on net investment income daily and pays them monthly. Capital
gain distributions, if any, are generally declared and paid annually. An
additional distribution may be paid by the Fund to avoid imposition of
federal income tax on any remaining undistributed net investment income
and capital gains. The Fund may periodically make reclassifications among
certain of its capital accounts without impacting net asset value for
differences between federal tax regulations and generally accepted
accounting principles.
Expenses: Most expenses can be directly attributed to the Fund. Expenses
which cannot be directly attributed are allocated among all funds based
principally on their relative net assets.
Annual Report 15
<PAGE>
SSgA
US Treasury Money Market Fund
Notes to Financial Statements, continued
August 31, 1999
Deferred organization expenses: The Fund has incurred expenses in
connection with its organization and initial registration. These costs
have been deferred and are being amortized over 60 months on a
straight-line basis.
Repurchase agreements: The Fund may engage in repurchase and tri-party
repurchase agreements with several financial institutions whereby the
Fund, through its custodian or third-party custodian, receives delivery of
the underlying securities. The market value of these securities (including
accrued interest) on acquisition date is required to be an amount equal to
at least 102% of the repurchase price. State Street Bank and Trust Company
(the "Advisor") will monitor repurchase agreements daily to determine that
the market value (including accrued interest) of the underlying securities
remains equal to at least 102% of the repurchase price at Fedwire closing
time. The Adviser or third-party custodian will notify the seller to
immediately increase the collateral on the repurchase agreement to 102% of
the repurchase price if collateral falls below 102%.
3. Securities Transactions
Investment transactions: For the year ended August 31, 1999, purchases and
maturities of US Government and Agency obligations, excluding repurchase
agreements aggregated to $971,335,951 and $625,000,000, respectively.
4. Related Parties
Adviser: The Investment Company has investment advisory agreements with
State Street Bank and Trust Company under which the Adviser directs the
investments of the Fund in accordance with its investment objectives,
policies, and limitations. For these services, the Fund pays a fee to the
Adviser, calculated daily and paid monthly, at the annual rates of .25% of
its average daily net assets. The Adviser voluntarily agreed to reimburse
the Fund for all expenses in excess of .20% of its average daily net
assets on an annual basis. As of August 31, 1999, the receivable due from
the Adviser for expenses in excess of the expense cap has been netted
against the Advisory fee payable. The Investment Company also has
contracts with the Adviser to provide custody, shareholder servicing and
transfer agent services to the Fund. These amounts are presented in the
accompanying Statement of Operations.
In addition, the Fund has entered into arrangements with its Adviser
whereby credits realized as a result of uninvested cash balances were used
to reduce a portion of the Fund's expenses. During the period, the Fund's
custodian fees were reduced by $26,214 under these arrangements.
Administrator: The Investment Company has an administration agreement with
Frank Russell Investment Management Company (the "Administrator"), a
wholly owned subsidiary of The Northwestern Mutual Life Insurance Company,
under which the Administrator supervises all non-portfolio investment
aspects of the Investment Company's operations and provides adequate
office space and all necessary office equipment and services, including
telephone service, utilities, stationery supplies, and similar items. The
Investment Company pays the Administrator the following fees for services
supplied by the Administrator pursuant to the Administration Agreement:
(i) an annual fee, payable monthly on a pro rata basis, based on the
following percentages of the average daily net assets of all domestic
funds: $0 up to and including $500 million - .06%; over $500 million to
and including $1 billion - .05%; over $1 billion - .03%, and (ii) less an
amount equal to the sum of certain distribution-related expenses incurred
by the Investment Company's Distributor on behalf of the Fund (up to a
maximum of 10%, for the period September 1, 1997 to December 31, 1997, up
to a maximum of 5%, for the
16 Annual Report
<PAGE>
SSgA
US Treasury Money Market Fund
Notes to Financial Statements, continued
August 31, 1999
period January 1, 1998 to December 31, 1998 and 0% thereafter, of the
asset-based fee determined in (i)). In addition, the Fund reimburses the
Administrator for out-of-pocket expenses and start-up costs for new funds.
Distributor and shareholder servicing: The Investment Company has a
Distribution Agreement with Russell Fund Distributors (the "Distributor")
which is a wholly-owned subsidiary of the Administrator to promote and
offer shares of the Investment Company. The Distributor may enter into
sub-distribution agreements with other non-related parties. The amounts
paid to the Distributor are included in the accompanying Statement of
Operations.
The Investment Company has a Distribution Plan pursuant to Rule 12b-1 (the
"Plan") under the 1940 Act. Under this Plan, the Investment Company is
authorized to make payments to the Distributor, or any Shareholder
Servicing Agent, as defined in the Plan, for providing distribution and
marketing services, for furnishing assistance to investors on an ongoing
basis, and for the reimbursement of direct out-of-pocket expenses charged
by the Distributor in connection with the distribution and marketing of
shares of the Investment Company and the servicing of investor accounts.
The Fund has service agreements with the Adviser. For these services, the
Fund pays .025% to the Adviser, based upon the average daily value of all
Fund shares held. For the year ended August 31, 1999, the Fund was charged
shareholder servicing expenses of $256,889 by the Adviser.
The combined distribution and shareholder servicing payments shall not
exceed .25% of the average daily value of net assets on an annual basis.
The shareholder servicing payments shall not exceed .20% of the average
daily value of net assets on an annual basis. Any payments that exceed the
maximum amount of allowable reimbursement may be carried forward for two
years following the year in which the expenditure was incurred so long as
the plan is in effect. The Fund's responsibility for any such expenses
carried forward shall terminate at the end of two years following the year
in which the expenditure was incurred. The Trustees or a majority of the
Fund's shareholders have the right, however, to terminate the Distribution
Plan and all payments thereunder at any time. The Fund will not be
obligated to reimburse the Distributor for carryover expenses subsequent
to the Distribution Plan's termination or noncontinuance. There were no
carryover expenses as of August 31, 1999.
Board of Trustees: Through May 31, 1999, the Investment Company paid each
Trustee not affiliated with the Investment Company a retainer of $48,000
annually, $1,500 for each board meeting attended, an additional $1,500 for
attending the annual audit committee meeting, and reimbursement for
out-of-pocket expenses. As of June 1, 1999 each Trustee receives $2,500
for each board meeting attended, an additional $2,500 for attending the
annual audit committee meeting and $2,500 for the valuation committee fee
in addition to the $48,000 annual retainer. These expenses are allocated
among all of the Funds based upon its relative net assets.
Annual Report 17
<PAGE>
SSgA
US Treasury Money Market Fund
Notes to Financial Statements, continued
August 31, 1999
Accrued fees payable to affiliates and trustees as of August 31, 1999 were
as follows:
Advisory fees $108,240
Administration fees 27,598
Custodian fees 55,197
Distribution fees 18,866
Shareholder servicing fees 21,156
Transfer agent fees 24,635
Trustees' fees 2,153
--------
$257,845
========
Beneficial interest: As of August 31, 1999, two shareholders (who were
also affiliates of the Investment Company) were record owners of
approximately 58% and 15%, respectively, of the total outstanding shares
of the Fund.
5. Fund Share Transactions (On a Constant Dollar Basis):
(amounts in thousands)
Fiscal Years Ended August 31,
-----------------------------
1999 1998
---------- ----------
Proceeds from shares sold .................. 8,297,431 9,616,163
Proceeds from reinvestment of distributions 9,755 16,817
Payments for shares redeemed ............... (8,191,939) (9,549,502)
---------- ----------
Total net increase (decrease) .............. 115,247 83,478
========== ==========
18 Annual Report
<PAGE>
SSgA US Treasury Money Market Fund
One International Place, 27th Floor
Boston, Massachusetts 02110
(800) 997-7327
- --------------------------------------------------------------------------------
Trustees
Lynn L. Anderson, Chairman
William L. Marshall
Steven J. Mastrovich
Patrick J. Riley
Richard D. Shirk
Bruce D. Taber
Henry W. Todd
Officers
Lynn L. Anderson, President, Treasurer and CEO
Mark E. Swanson, Assistant Secretary, Assistant
Treasurer and Principal Accounting Officer
J. David Griswold, Vice President and Secretary
Deedra S. Walkey, Assistant Secretary
Rick J. Chase, Assistant Secretary
Carla L. Anderson, Assistant Secretary
Investment Adviser
State Street Bank and Trust Company
225 Franklin Street
Boston, Massachusetts 02110
Custodian, Transfer Agent and
Office of Shareholder Inquiries
State Street Bank and Trust Company
1776 Heritage Drive
North Quincy, Massachusetts 02171
(800) 647-7327
Distributor
Russell Fund Distributors, Inc.
One International Place, 27th Floor
Boston, Massachusetts 02110
(800) 997-7327
Administrator
Frank Russell Investment Management Company
909 A Street
Tacoma, Washington 98402
Legal Counsel
Goodwin, Procter & Hoar LLP
Exchange Place
Boston, Massachusetts 02109
Independent Accountants
PricewaterhouseCoopers LLP
160 Federal Street
Boston, Massachusetts 02110
Annual Report 19
<PAGE>
SSgA(R) Funds
Yield Plus Fund
Annual Report
August 31, 1999
Table of Contents
Page
Chairman's Letter............................................. 4
Portfolio Management Discussion and Analysis.................. 6
Report of Independent Accountants............................. 8
Financial Statements.......................................... 9
Financial Highlights.......................................... 15
Notes to Financial Statements................................. 16
Fund Management and Service Providers......................... 22
"SSgA(R)" is a registered trademark of State Street Corporation and is licensed
for use by the SSgA Funds.
This report is prepared from the books and records of the Fund and it is
submitted for the general information of shareholders. This information is for
distribution to prospective investors only when preceded or accompanied by a
SSgA Funds Prospectus containing more complete information concerning the
investment objective and operations of the Fund, charges and expenses. The
Prospectus should be read carefully before an investment is made.
Performance is historical and assumes reinvestment of all dividends and capital
gains. Investment return and principal value will fluctuate so that an
investor's shares, when redeemed, may be worth more or less than when purchased.
Past performance is not indicative of future results. Russell Fund Distributors,
Inc., is the distributor of the SSgA Funds.
<PAGE>
SSgA Yield Plus Fund
- --------------------------------------------------------------------------------
Letter From the Chairman of State Street Global Advisors
- --------------------------------------------------------------------------------
Dear Shareholders,
It is my pleasure to provide you with the SSgA Funds annual report for the
fiscal year ended August 31, 1999. The SSgA Fund family has grown to include
twenty-three portfolios covering a broad range of investment strategies. The
enclosed information provides an overview of the investment process for the SSgA
Yield Plus Fund. This overview contains market updates, performance, and
financial information for the Fund. I hope you will find this information a
useful reference as you review your investment strategy.
During the past fiscal year, the SSgA Fund family has opened two new Funds. The
names and investment objectives for these funds are as follows:
The SSgA Aggressive Equity Fund seeks to maximize total return through investing
in US equity securities that are undervalued relative to their growth potential
as measured by SSgA's proprietary models.
The SSgA IAM Shares Fund seeks to maximize total return by investing primarily
in equity securities of companies that have entered into collective bargaining
agreements with the International Association of Machinists and Aerospace
Workers or affiliated labor unions.
Additionally, three SSgA Funds achieved a five-year track record during the 1999
fiscal year. These funds include the two institutional money market funds, SSgA
US Treasury and SSgA Prime Money Market Funds and the SSgA Emerging Markets
Fund. We are proud of our long-term record and look forward to having additional
funds complete their five-year anniversary.
In today's complex global marketplace, we are continually researching new
products and ideas to introduce to our fund family. Here at SSgA, we are
committed to providing a wide range of competitive investment vehicles to
fulfill your investment needs.
I would like to thank you for choosing the SSgA Funds.
Sincerely,
/s/ Nicholas A. Lopardo
Nicholas A. Lopardo
State Street Global Advisors
Chairman and Chief Executive Officer
4 Annual Report
<PAGE>
SSgA Yield Plus Fund
- --------------------------------------------------------------------------------
Management of the Funds
- --------------------------------------------------------------------------------
[PHOTO]
Nicholas A. Lopardo
Chairman and Chief Executive Officer
A Team Approach to Investment Management
Our investment strategies are the product of the combined experience of our
professional staff. Portfolio Managers work together to develop and enhance the
techniques that drive our investment processes. As a result, the portfolios we
manage benefit from the knowledge of the entire team.
Mr. John Reohr, Principal, has been the portfolio manager primarily responsible
for investment decisions regarding the SSgA Yield Plus Fund since January 1998.
Mr. Reohr joined SSgA in April 1993 with responsibilities in cash and enhanced
cash portfolio management. Mr. Reohr began his Fixed Income career in 1983
working for Lehman Brothers' Treasury Trading Desk. Until 1989, Mr. Reohr
managed short and intermediate Fixed Income portfolios for Continental Bank.
Since then, Mr. Reohr has also managed government, mortgage, money market, and
Federal Funds arbitrage portfolios for the Federal Home Loan Bank of Boston. He
earned his BA in Political Science at Dickinson College and his MBA from the
University of Chicago. There are ten other portfolio managers working with Mr.
Reohr.
Annual Report 5
<PAGE>
SSgA Yield Plus Fund
- --------------------------------------------------------------------------------
Portfolio Management Discussion and Analysis
- --------------------------------------------------------------------------------
Objective: Maximize current income; preservation of capital and liquidity.
Invests in: High quality, investment grade, debt instruments including: US
Government Treasuries and Agencies, corporate bonds, asset-backed securities,
mortgage-backed securities, and high quality money market instruments
maintaining duration to one year or less.
Strategy: Fund Managers base their decisions on the relative attractiveness of
different sectors and issues which can vary depending on the general level of
interest rates, market determined risk premiums, as well as supply/demand
imbalances in the market.
- --------------------------------------------------------------------------------
GROWTH OF A $10,000 INVESTMENT
Dates Yield Plus Fund Salomon 3-Month T-Bill Salomon 6-Month T-Bill
Inception* $10,000 $10,000 $10,000
1993 $10,285 $10,256 $10,273
1994 $10,660 $10,621 $10,650
1995 $11,301 $11,213 $11,271
1996 $11,948 $11,813 $11,888
1997 $12,626 $12,433 $12,532
1998 $13,308 $13,082 $13,209
1999 $13,929 $13,688 $13,842
================================================================================
Performance Review
The SSgA Yield Plus Fund performed well this year, returning 4.67%, 2 basis
points over the Salomon Smith Barney 3-Month Treasury Bill Index return of
4.65%, and 14 basis points under the Salomon Smith Barney 6-Month Treasury Bill
Index return of 4.81%. The Fund's performance is net of operating expenses,
whereas Index results do not include expenses of any kind.
During the fall of 1998, the capital markets focused on the possibility for
"financial Armageddon" due to the Russian crisis and the initial liquidation of
Long Term Capital Management's hedge fund portfolio. The two-year Treasury note
rallied 120 basis points, to the low yield for the year of 3.82%. Coincident
with the Treasury rally, the risk premium for all non-Treasury debt increased
markedly. The Manager believes the market re-priced all credit risks. Swap
spreads reflect these generic market requirements for accepting credit risk, as
they represent the yield difference between Treasuries and top tier
international banks. These spreads are highly correlated with spreads on
corporate bonds, asset-backed
- --------------------------------------------------------------------------------
SSgA Yield Plus Fund
- --------------------------------------------------------------------------------
Period Ended Growth of Total
08/31/99 $10,000 Return
- ----------------- ------------ ------
1 Year $ 10,467 4.67%
5 Years $ 13,070 5.50%+
Inception $ 13,929 4.99%+
- --------------------------------------------------------------------------------
Salomon Smith Barney 3-Month Treasury Bill Index
- --------------------------------------------------------------------------------
Period Ended Growth of Total
08/31/99 $10,000 Return
- ----------------- ------------ ------
1 Year $ 10,465 4.65%
5 Years $ 12,890 5.21%+
Inception $ 13,688 4.70%+
- --------------------------------------------------------------------------------
Salomon Smith Barney 6-Month Treasury Bill Index
- --------------------------------------------------------------------------------
Period Ended Growth of Total
08/31/99 $10,000 Return
- ----------------- ------------ ------
1 Year $ 10,481 4.81%
5 Years $ 12,999 5.39%+
Inception $ 13,842 4.88%+
See related Notes on following page.
6 Annual Report
<PAGE>
SSgA Yield Plus Fund
- --------------------------------------------------------------------------------
Portfolio Management Discussion and Analysis
- --------------------------------------------------------------------------------
securities, mortgages, and other investments held by the Fund. The Federal
Reserve reacted by lowering the Federal Funds Rate by 75 basis points to guard
against global recession and to restore confidence in the marketplace.
The spring of 1999 saw improving liquidity and diminished fear in the market.
The market normalized and demand for Treasuries declined, pushing the yield on
two-year notes up 120 basis points to 5.00%. The required risk premium for
credit exposure declined as well, and three-year swap spreads tightened to 49
basis points, a low for the year. In May, the market began to focus on the
reasonable prospects for global recovery as well as the possibility that the
Federal Reserve would take back its previous eases. Additionally, the impending
arrival of Y2K began to affect the market, as issuers sought to gain funding
earlier into the year in an attempt to avoid any year-end market disruptions.
With no exogenous events, the supply shifts overwhelmed demand and credit
spreads exploded. Three-year swaps reached 88 basis points. The Fed increased
rates 25 basis points in both June and August driving two-year note yields to a
high of 5.77%.
The year was an exceptionally unpredictable and volatile year for both interest
rates and credit spreads. The two-year note traded in a range encompassing 191
basis points, ending the year 94 basis points higher than where it began. The
volatility of swap spreads and the trend towards wider spreads hurt the prices
of the Fund's holdings.
Market and Portfolio Highlights
The market's erratic behavior greatly limited investment themes with the
potential to produce consistent positive returns. Additionally, security dealers
reduced their capital allocation to secondary trading which markedly diminished
liquidity. As a consequence, trading volume declined steadily through the course
of the year and dealer bid/ask spreads widened. Given this background, the
Manager sought to minimize turnover and take advantage of relative value
opportunities in the market.
The Fund's duration was extended to around 180 days in order to take advantage
of the steeper yield curve, and to be more consistent with the other funds in
its peer group. The 1-month to 1-year LIBOR curve steepened from -13 basis
points to +68 basis points during the year. Short duration fixed rate Asset
Backed Securities are priced off of the LIBOR curve and were utilized to
accomplish the duration extension.
- --------------------------------------------------------------------------------
Top Ten Issuers
(as a percent of Total Investments) August 31, 1999
- --------------------------------------------------------------------------------
Federal National Mortgage Association 10.1%
Government National Mortgage Association 8.2
Federal Home Loan Mortgage Corp. 6.3
AT&T Capital Corp. 5.9
Bank Boston Corp. 4.9
Household Finance Corp. 4.7
Household Consumer Loan Trust 4.3
Lehman Brothers Holdings, Inc. 4.2
Superior Wholesale Inventory Financing Trust 4.1
National Westminister Finance 4.0
- --------------------------------------------------------------------------------
---------------------------------------
Notes: The following notes relate to the Growth of $10,000 graph and table on
the preceding page.
* The Fund commenced operations on November 9, 1992. Index comparisons began
November 1, 1992.
++ Equal dollar amounts of 3-month Treasury bills are purchased at the
beginning of each of three consecutive months. As each bill matures all
proceeds are rolled over or reinvested in a new 3-month bill. The income
used to calculate the monthly return is derived by subtracting the
original amount invested from the maturity value. The yield curve average
is the basis for calculating the return on the Index. The Index is
rebalanced monthly by market capitalization.
++++ The total return calculated for the Salomon Smith Barney 6-Month Treasury
Bills Index includes principal gain or loss, income and reinvestment of
proceeds. The Index is based on a rolling maturity concept and holding the
bond to maturity. For example, the Index will contain, at any point,
issues with 1-6 months of remaining maturity.
+ Annualized.
Performance is historical and assumes reinvestment of all dividends and capital
gains. Investment return and principal value will fluctuate so that an
investor's shares, when redeemed, may be worth more or less than when purchased.
Past performance is not indicative of future results.
Annual Report 7
<PAGE>
Report of Independent Accountants
To the Shareholders and Board of Trustees
of the SSgA Funds:
In our opinion, the accompanying statement of assets and liabilities and
statement of net assets, and the related statements of operations and of changes
in net assets and the financial highlights present fairly, in all material
respects, the financial position of SSgA Yield Plus Fund (the "Fund") at August
31, 1999, the results of its operations for the fiscal year then ended and the
changes in its net assets for each of the two fiscal years in the period then
ended, and the financial highlights for each of the five fiscal years in the
period then ended, in conformity with generally accepted accounting principles.
These financial statements and financial highlights (hereafter referred to as
"financial statements") are the responsibility of the Fund's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in accordance
with generally accepted auditing standards which require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits, which included confirmation of securities at August
31, 1999 by correspondence with the custodian and brokers, provide a reasonable
basis for the opinion expressed above.
Boston, Massachusetts
October 11, 1999
/s/ PricewaterhouseCoopers LLP
8 Annual Report
<PAGE>
SSgA
Yield Plus Fund
Statement of Net Assets
August 31, 1999
Principal Market
Amount Value
(000) (000)
$ $
--------- ------
Long-Term Investments - 91.1%
Asset-Backed Securities - 23.6%
Amresco Residential Securities Mortgage
Loan Trust
Series 1997-3 Class A10
5.529% due 09/01/27 (a) 2,998 3,013
Series 1998-1 Class A7
5.539% due 10/25/27 (a) 3,233 3,233
Capital One Master Trust
Series 1995-1 Class A
5.459% due 10/15/03 (a) 4,000 3,997
CIT RV Trust
Series 1996-A Class A
5.400% due 12/15/11 7,112 7,058
Contimortgage Home Equity Loan Trust
Series 1996-1 Class A4
5.980% due 01/15/11 290 289
Delta Funding Home Equity Loan Trust
Series 1998-1 Class A2F
6.310% due 08/25/19 10,000 9,932
EQCC Home Equity Loan Trust
Series 1998-1 Class A1F
6.210% due 12/15/07 1,582 1,578
Series 1999-3 Class A2F
6.887% due 10/25/13 10,000 9,938
General Electric Capital Mortgage
Services, Inc.
Series 1997-HE3 Class A3
6.520% due 08/25/13 3,942 3,929
Household Consumer Loan Trust
Series 1996-2 Class A2
5.589% due 08/15/06 (a) 21,333 21,113
IMC Home Equity Loan Trust
Series 1998-3 Class A3
6.160% due 05/20/14 (a) 10,000 9,933
Saxon Asset Securities Trust
Series 1998-3 Class AF2
5.750% due 05/25/18 (a) 13,000 12,838
Saxon Asset Securities Trust
Step Up Bond
Series 1996-2 Class A6
5.579% due 11/25/26 (a) 3,941 3,927
Superior Wholesale Inventory
Financing Trust
Series 1999-A Class A1
5.394% due 05/15/06 (a) 20,000 19,913
Textron Financial Corp. Receivables
Series 1997-A Class A
6.050% due 03/16/09 4,130 4,118
Series 1998-A Class A1
5.820% due 01/15/02 (a) 5,713 5,695
The Money Store Home Equity Trust
Series 1994-A Class A3
5.525% due 09/15/18 (a) 1,506 1,492
Series 1998-B Class AF2
6.115% due 06/15/10 1,917 1,914
--------
123,910
--------
Corporate Bonds and Notes - 27.9%
Airtouch Communications, Inc.
7.125% due 07/15/01 5,000 5,029
AT&T Capital Corp.
7.500% due 11/15/00 (MTN) 5,750 5,782
Series G
5.480% due 04/09/01 (MTN)(a) 23,000 22,988
BankBoston Corp.
5.605% due 02/10/01 (a) 5,000 4,977
5.605% due 08/24/01 (MTN)(a) 9,000 8,951
5.460% due 07/14/03 (MTN)(a) 10,000 9,807
Boeing Capital Corp.
5.364% due 03/27/02 (MTN)(a) 12,500 12,394
Case Credit Corp.
Series B
5.500% due 08/01/01 (MTN)(a) 5,500 5,492
Annual Report 9
<PAGE>
SSgA
Yield Plus Fund
Statement of Net Assets, continued
August 31, 1999
Principal Market
Amount Value
(000) (000)
$ $
--------- ------
Caterpillar Financial Services Corp.
Series F
5.460% due 07/09/01 (MTN)(a) 12,000 12,023
Finova Capital Corp.
5.633% due 08/14/01 (MTN)(a) 14,000 13,993
Goldman Sachs Group L.P.
5.316% due 06/02/04 (a) 5,000 4,957
Household Finance Corp.
5.455% due 06/17/05 (MTN)(a) 23,000 22,933
Lehman Brothers Holdings, Inc.
Series E
6.375% due 03/15/01 (MTN) 8,500 8,424
Raytheon Co.
6.300% due 08/15/00 5,000 4,995
Sprint Spectrum L.P. Step Up Bond
Zero Coupon due 08/15/06 (a) 4,000 3,656
--------
146,401
--------
Eurodollar Bonds - 14.7%
Allied Irish Banks
5.613% due 10/31/06 (MTN)(a) 15,000 14,915
Bankers Trust Australia
5.366% due 06/02/08 (a) 17,500 17,224
Denmark Danske Bank
5.664% due 06/04/06 (a) 2,000 1,981
Finova Capital Corp.
Series EMTN
5.426% due 06/18/03 (MTN)(a) 2,000 1,988
Lehman Brothers Holdings PLC
5.500% due 02/20/01 (MTN)(a) 5,000 4,983
5.369% due 09/03/02 (MTN)(a) 7,300 7,214
Lloyds Bank PLC
5.563% due 06/29/49 (a)(e) 4,000 3,385
National Westminster Finance
5.188% due 04/18/05 (a) 20,000 19,582
Nordbanken AB
Series 35
5.597% due 03/29/49 (MTN)(a) 6,250 6,077
--------
77,349
--------
Mortgage-Backed Securities - 24.9%
Federal Home Loan Mortgage Corp. Participation
Certificate
7.000% due 2000 347 347
6.065% due 2018 (a) 2,561 2,565
6.855% due 2020 (a) 6,876 6,988
6.983% due 2020 (a) 12,967 13,166
6.586% due 2023 (a) 943 958
6.983% due 2024 (a) 2,317 2,368
Federal Home Loan Mortgage Corp.
Interest Only Strip
6.029% due 07/01/29 (a) 4,413 4,402
Federal National Mortgage Association
6.906% due 2008 (a) 4,546 4,630
8.000% due 2013 4,481 4,536
5.878% due 2019 (a) 5,142 5,171
5.893% due 2019 (a) 975 984
6.460% due 2020 (a) 3,779 3,884
6.627% due 2022 (a) 12,141 12,516
6.341% due 2023 (a) 4,648 4,712
6.798% due 2025 (a) 1,802 1,852
6.826% due 2030 (a) 10,812 11,101
Government National Mortgage Association
8.000% due 2012 1,454 1,495
4.500% due 2028 (a) 30,596 29,793
4.500% due 2029 (a) 8,857 8,556
Main Place Real Estate Investments
5.457% due 10/25/00 (a) 11,000 11,000
--------
131,024
--------
Total Long-Term Investments
(cost $482,237) 478,684
--------
10 Annual Report
<PAGE>
SSgA
Yield Plus Fund
Statement of Net Assets, continued
August 31, 1999
Principal Market
Amount Value
(000) (000)
$ $
--------- ------
Short-Term Investments - 1.9%
AIM Short Term Investment Portfolio
Class A (b) 9,331 9,331
United States Treasury Bills
4.768% due 11/18/99 (c)(d) 650 643
--------
Total Short-Term Investments
(cost $9,974) 9,974
--------
Total Investments - 93.0%
(identified cost $492,211) 488,658
Other Assets and Liabilities,
Net - 7.0% 36,836
--------
Net Assets - 100.0% 525,494
========
Unrealized
Number Appreciation
of (Depreciation)
Contracts (000)
--------- --------------
Futures Contracts
Eurodollar Financial
Futures Contracts
Expiration date 06/00 200 $ (149)
--------
Total Unrealized Appreciation
(Depreciation) on Open
Futures Contracts Purchased $ (149)
========
(a) Adjustable or floating-rate security.
(b) At cost, which approximates market.
(c) Rate noted is yield-to-maturity (Unaudited).
(d) Held as collateral in connection with futures contracts purchased by the
Fund.
(e) Perpetual floating rate note.
Abbreviations:
MTN - Medium Term Note
See the accompanying notes which are an integral part of the financial
statements.
Annual Report 11
<PAGE>
SSgA
Yield Plus Fund
Statement of Assets and Liabilities
Amounts in thousands (except per share amount) August 31, 1999
<TABLE>
<S> <C> <C>
Assets
Investments at market (identified cost $492,211) ............................ $488,658
Cash ........................................................................ 1,836
Receivables:
Dividends and interest ................................................... 3,394
Investments sold ......................................................... 42,688
Fund shares sold ......................................................... 11,919
Prepaid expenses ............................................................ 12
--------
Total Assets .......................................................... 548,507
Liabilities
Payables:
Dividends ...................................................... $ 2,246
Investments purchased .......................................... 19,324
Fund shares redeemed ........................................... 1,095
Accrued fees to affiliates ..................................... 298
Other accrued expenses ......................................... 22
Daily variation margin on futures contracts .................... 28
-------
Total Liabilities ..................................................... 23,013
--------
Net Assets .................................................................. $525,494
========
Net Assets Consist of:
Accumulated distributions in excess of net investment income ................ $ (108)
Accumulated net realized gain (loss) ........................................ (2,897)
Unrealized appreciation (depreciation) on:
Investments .............................................................. (3,553)
Futures contracts ........................................................ (149)
Shares of beneficial interest ............................................... 53
Additional paid-in capital .................................................. 532,148
--------
Net Assets .................................................................. $525,494
========
Net Asset Value, offering and redemption price per share:
($525,493,532 divided by 53,062,054 shares of $.001 par value
shares of beneficial interest outstanding) ............................ $ 9.90
========
</TABLE>
See the accompanying notes which are an integral part of the financial
statements.
12 Annual Report
<PAGE>
SSgA
Yield Plus Fund
Statement of Operations
Amount in thousands For the Fiscal Year Ended August 31, 1999
<TABLE>
<S> <C> <C>
Investment Income
Interest ................................................................. $35,556
Dividends ................................................................ 719
-------
Total Investment Income ............................................... 36,275
Expenses
Advisory fees .................................................. $ 1,590
Administrative fees ............................................ 198
Custodian fees ................................................. 71
Distribution fees .............................................. 249
Transfer agent fees ............................................ 79
Professional fees .............................................. 24
Registration fees .............................................. 38
Shareholder servicing fees ..................................... 296
Trustees' fees ................................................. 15
Miscellaneous .................................................. 42
-------
Total Expenses ........................................................ 2,602
-------
Net investment income ....................................................... 33,673
-------
Net Realized and Unrealized Gain (Loss)
Net realized gain (loss) on:
Investments .................................................... (675)
Futures contracts .............................................. (296)
Options written ................................................ 10 (961)
-------
Net change in unrealized appreciation (depreciation) on:
Investments .................................................... (2,355)
Futures contracts .............................................. (127) (2,482)
------- -------
Net realized and unrealized gain (loss) ..................................... (3,443)
-------
Net increase (decrease) in net assets resulting from operations ............. $30,230
=======
</TABLE>
See the accompanying notes which are an integral part of the financial
statements.
Annual Report 13
<PAGE>
SSgA
Yield Plus Fund
Statement of Changes in Net Assets
Amounts in thousands For the Fiscal Years Ended August 31,
<TABLE>
<CAPTION>
1999 1998
--------- ---------
<S> <C> <C>
Increase (Decrease) in Net Assets
Operations
Net investment income .................................................. $ 33,673 $ 35,386
Net realized gain (loss) ............................................... (961) (353)
Net change in unrealized appreciation (depreciation) ................... (2,482) (1,655)
--------- ---------
Net increase (decrease) in net assets resulting from operations ..... 30,230 33,378
--------- ---------
Distributions
From net investment income ............................................. (33,598) (35,250)
In excess of net investment income ..................................... (102) (136)
--------- ---------
Net decrease from distributions ..................................... (33,700) (35,386)
--------- ---------
Share Transactions
Net increase (decrease) in net assets from share transactions .......... (143,501) (165,582)
--------- ---------
Total Net Increase (Decrease) in Net Assets ............................... (146,971) (167,590)
Net Assets
Beginning of period .................................................... 672,465 840,055
--------- ---------
End of period (including accumulated distributions in excess of
net investment income of $108 and $75, respectively) ................ $ 525,494 $ 672,465
========= =========
</TABLE>
See the accompanying notes which are an integral part of the financial
statements.
14 Annual Report
<PAGE>
SSgA
Yield Plus Fund
Financial Highlights
The following table includes selected data for a share outstanding throughout
each period and other performance information derived from the financial
statements.
<TABLE>
<CAPTION>
Fiscal Years Ended August 31,
-----------------------------------------------------
1999 1998 1997 1996 1995
------- ------- ------- ------- ---------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period .................. $ 9.97 $ 10.01 $ 10.00 $ 10.00 $ 9.99
------- ------- ------- ------- ---------
Income From Operations
Net investment income (a) .......................... .54 .57 .54 .56 .56
Net realized and unrealized gain (loss) ............ (.07) (.04) .01 -- .02
------- ------- ------- ------- ---------
Total Income From Operations ..................... .47 .53 .55 .56 .58
------- ------- ------- ------- ---------
Distributions
From net investment income ......................... (.54) (.57) (.54) (.56) (.56)
From net realized gain on investments .............. -- -- -- -- (.01)
------- ------- ------- ------- ---------
Total Distributions .............................. (.54) (.57) (.54) (.56) (.57)
------- ------- ------- ------- ---------
Net Asset Value, End of Period ........................ $ 9.90 $ 9.97 $ 10.01 $ 10.00 $ 10.00
======= ======= ======= ======= =========
Total Return (%) ...................................... 4.67 5.40 5.67 5.73 6.01
Ratios/Supplemental Data:
Net Assets, end of period ($ in thousands) ......... 525,494 672,465 840,055 933,485 1,447,097
Ratios to average net assets (%):
Operating expenses ............................... .41 .41 .38 .36 .38
Net investment income ............................ 5.29 5.66 5.42 5.59 5.64
Portfolio turnover rate (%) ........................ 167.12 249.10 92.38 97.05 199.69
</TABLE>
(a) For the period subsequent to August 31, 1998, average month-end shares
outstanding were used for this calculation.
Annual Report 15
<PAGE>
SSgA
Yield Plus Fund
Notes to Financial Statements
August 31, 1999
1. Organization
The SSgA Funds (the "Investment Company") is a series mutual fund,
currently comprised of 23 investment portfolios which are in operation as
of August 31, 1999. These financial statements report on one portfolio,
the SSgA Yield Plus Fund (the "Fund"). The Investment Company is a
registered and diversified open-end investment company, as defined in the
Investment Company Act of 1940, as amended (the "1940 Act"), that was
organized as a Massachusetts business trust on October 3, 1987 and
operates under a First Amended and Restated Master Trust Agreement, dated
October 13, 1993, as amended (the "Agreement"). The Investment Company's
Agreement permits the Board of Trustees to issue an unlimited number of
full and fractional shares of beneficial interest at a $.001 par value.
2. Significant Accounting Policies
The Fund's financial statements are prepared in accordance with generally
accepted accounting principles which require the use of management
estimates. The following is a summary of the significant accounting
policies consistently followed by the Fund in the preparation of its
financial statements.
Security valuation: United States fixed-income securities listed and
traded principally on any national securities exchange are valued on the
basis of the last sale price or, lacking any sale, at the closing bid
price, on the primary exchange on which the security is traded. United
States over-the-counter, fixed-income securities and options are valued on
the basis of the closing bid price. Futures contracts are valued on the
basis of the last sale price.
Many fixed-income securities do not trade each day, and thus last sale or
bid prices are frequently not available. Fixed-income securities may be
valued using prices provided by a pricing service when such prices are
believed to reflect the market value of such securities.
Money market instruments maturing within 60 days of the valuation date are
valued at amortized cost, a method by which each portfolio instrument is
initially valued at cost, and thereafter a constant accretion/amortization
to maturity of any discount or premium is assumed, unless the Board of
Trustees determines that amortized cost does not represent fair value.
The Fund may value securities for which market quotations are not readily
available at "fair value," as determined in good faith pursuant to
procedures established by the Board of Trustees.
Securities transactions: Securities transactions are recorded on a trade
date basis. Realized gains and losses from securities transactions are
recorded on the basis of identified cost.
Investment income: Interest income is recorded daily on the accrual basis.
Amortization and accretion: All zero-coupon bond discounts and original
issue discounts are accreted for both tax and financial reporting
purposes. All short- and long-term market premiums/discounts are
amortized/accreted for both tax and financial reporting purposes.
Federal income taxes: Since the Investment Company is a Massachusetts
business trust, each fund is a separate corporate taxpayer and determines
its net investment income and capital gains (or losses) and the amounts to
be distributed to each fund's shareholders without regard to the income
and capital gains (or losses) of the other funds.
16 Annual Report
<PAGE>
SSgA
Yield Plus Fund
Notes to Financial Statements, continued
August 31, 1999
It is the Fund's intention to qualify as a regulated investment company,
as defined by the Internal Revenue Code of 1986, as amended. This requires
the Fund to distribute all of its taxable income. Therefore, the Fund paid
no federal income taxes and no federal income tax provision was required.
At August 31, 1999, the Fund had net tax basis capital loss carryovers of
$1,086,432 and $1,891,302, which may be applied against any realized net
taxable gains in each succeeding year or until their expiration dates of
August 31, 2004, and August 31, 2007, respectively, whichever occurs
first. As permitted by tax regulations, the Fund intends to defer a net
realized capital loss of $68,543 incurred from November 1, 1998 to August
31,1999, and treat it as arising in fiscal year 2000.
The Fund's aggregate cost of investments and the composition of unrealized
appreciation and depreciation of investment securities for federal income
tax purposes as of August 31, 1999 are as follows:
Net Unrealized
Unrealized Unrealized Appreciation
Federal Tax Cost Appreciation (Depreciation) (Depreciation)
---------------- ------------ -------------- --------------
$492,210,831 $426,025 $(3,978,635) $(3,552,610)
Dividends and distributions to shareholders: The Fund declares and records
dividends on net investment income daily and pays them monthly. Capital
gain distributions, if any, are generally declared and paid annually. An
additional distribution may be paid by the Fund to avoid imposition of
federal income tax on any remaining undistributed net investment income
and capital gains.
The timing and characterization of certain income and capital gain
distributions are determined in accordance with federal tax regulations
which may differ from generally accepted accounting principles ("GAAP").
As a result, net investment income and net realized gain (or loss) from
investment transactions for a reporting period may differ significantly
from distributions during such period. The differences between tax
regulations and GAAP relate primarily to investments in certain fixed
income securities purchased at a discount, futures, mortgage-backed
securities, and certain securities sold at a loss. Accordingly, the Fund
may periodically make reclassifications among certain of its capital
accounts without impacting its net asset value.
Expenses: Most expenses can be directly attributed to the Fund. Expenses
which cannot be directly attributed are allocated among all funds based
principally on their relative net assets.
Forward commitments/Mortgage dollar rolls: The Fund may contract to
purchase securities for a fixed price at a future date beyond customary
settlement time (not to exceed 120 days)(i.e., a "forward commitment" or
"delayed settlement" transaction, e.g., to be announced ("TBA"))
consistent with a Fund's ability to manage its investment portfolio and
meet redemption requests. The Fund may enter into mortgage dollar rolls
(principally in TBA's) in which the Fund purchases a mortgage security and
sells a similar mortgage security before settlement of the purchased
mortgage security occurs. The Fund may realize a short-term gain (or
loss), based on market movements, upon such sale. When effecting such
transactions, cash or liquid high-grade debt obligations of the Fund will
be segregated on the Fund's records in a dollar amount sufficient to make
payment for the portfolio securities to be purchased at the trade date and
maintained until the transaction is settled. A forward commitment
transaction involves a risk of loss if the value of the security to be
purchased declines prior to the settlement date or the other party to the
transaction fails to complete the transaction.
Annual Report 17
<PAGE>
SSgA
Yield Plus Fund
Notes to Financial Statements, continued
August 31, 1999
Derivatives: To the extent permitted by the investment objective,
restrictions and policies set forth in the Fund's Prospectus and Statement
of Additional Information, the Fund may participate in various
derivative-based transactions. Derivative securities are instruments or
agreements whose value is derived from an underlying security or index.
The Fund's use of derivatives includes exchange-traded futures and options
on futures. These instruments offer unique characteristics and risks that
assist the Fund in meeting its investment objective.
The Fund typically uses derivatives in three ways: cash equitization,
hedging, and return enhancement. Cash equitization is a technique that may
be used by the Fund through the use of options and futures to earn
"market-like" returns with the Fund's excess and liquidity reserve cash
balances. Hedging is used by the Fund to limit or control risks, such as
adverse movements in exchange rates and interest rates. Return enhancement
can be accomplished through the use of derivatives in the Fund. By
purchasing certain instruments, the Fund may more effectively achieve the
desired portfolio characteristics that assist in meeting the Fund's
investment objectives. Depending on how the derivatives are structured and
utilized, the risks associated with them may vary widely. These risks are
generally categorized as market risk, liquidity risk and counterparty or
credit risk.
Futures: The Fund utilizes exchange-traded futures contracts. The primary
risks associated with the use of futures contracts are an imperfect
correlation between the change in market value of the securities held by
the Funds and the prices of futures contracts and the possibility of an
illiquid market. Changes in initial settlement value are accounted for as
unrealized appreciation (depreciation) until the contracts are terminated,
at which time realized gains and losses are recognized.
3. Securities Transactions
Investment transactions: For the year ended August 31, 1999, purchases and
sales of investment securities, excluding US Government and Agency
obligations, short-term investments, futures contracts, and repurchase
agreements aggregated to $881,885,633 and $913,510,977, respectively.
For the year ended August 31, 1999, purchases and sales of US Government
and Agency obligations, excluding short-term investments and futures
contracts, aggregated to $128,305,769 and $154,051,557, respectively.
Futures transactions: The Fund's transactions in futures contracts for the
year ended August 31, 1999, were as follows:
<TABLE>
<CAPTION>
Futures Contracts Futures Contracts
Sold Short Purchased
----------------------------- ----------------------------
Aggregate Aggregate
Number of Face Value of Number of Face Value of
Contracts Contracts (1) Contracts Contracts (1)
--------- ------------- --------- -------------
<S> <C> <C> <C> <C>
Outstanding at August 31, 1998 35 $ 8,271,130 -- $ --
Contracts opened 172 40,915,396 600 141,654,138
Contracts closed (207) (49,186,526) (400) (94,630,300)
----- ------------ ----- ------------
Outstanding at August 31, 1999 -- $ -- 200 $ 47,023,838
===== ============ ===== ============
</TABLE>
(1) The aggregate face value of contracts is computed on the date each
contract was opened.
18 Annual Report
<PAGE>
SSgA
Yield Plus Fund
Notes to Financial Statements, continued
August 31, 1999
Securities Lending: Effective December 17, 1998, the Investment Company
started its securities lending program. The program allows each Fund to
loan securities with a value up to 33 1/3% of its total assets to certain
brokers. The Fund receives cash (U.S. currency), U.S. Government or U.S.
Government agency obligations as collateral against the loaned securities.
To the extent that a loan is secured by cash collateral, such collateral
shall be invested by State Street Bank and Trust Company in short-term
instruments, money market mutual funds, and such other short-term
investments, provided the investments meet certain quality and
diversification requirements. Under the securities lending arrangement,
the collateral received is recorded on the Fund's statement of assets and
liabilities along with the related obligation to return the collateral. In
those situations where the Company has relinquished control of securities
transferred, it derecognizes the securities and records a receivable from
the counterparty.
Income generated from the investment of cash collateral, less negotiated
rebate fees paid to participating brokers and transaction costs, is
divided between the Fund and State Street Bank and Trust Company and is
recorded as interest income for the Fund. To the extent that a loan is
secured by non-cash collateral, brokers pay the Fund negotiated lenders'
fees, which are divided between the Fund and State Street Bank and Trust
Company and are recorded as interest income for the Fund. All collateral
received will be in an amount at least equal to 102% (for loans of U.S.
securities) or 105% (for non-U.S. securities) of the market value of the
loaned securities at the inception of each loan. Should the borrower of
the securities fail financially, there is a risk of delay in recovery of
the securities or loss of rights in the collateral. Consequently, loans
are made only to borrowers which are deemed to be of good financial
standing. As of August 31, 1999, there were no outstanding securities on
loan.
4. Related Parties
Adviser: The Investment Company has an investment advisory agreement with
State Street Bank and Trust Company under which the Adviser directs the
investments of the Fund in accordance with its investment objectives,
policies, and limitations. For these services, the Fund pays a fee to the
Adviser, calculated daily and paid monthly, at the annual rate of .25% of
its average daily net assets. The Investment Company also has contracts
with the Adviser to provide custody, shareholder servicing, and transfer
agent services to the Fund. These amounts are presented in the
accompanying Statement of Operations.
In addition, the Fund has entered into arrangements with its Adviser
whereby credits realized as a result of uninvested cash balances were used
to reduce a portion of the Fund's expenses. During the period, the Fund's
custodian fees were reduced by $73,798 under these arrangements.
Administrator: The Investment Company has an administration agreement with
Frank Russell Investment Management Company (the "Administrator"), a
wholly owned subsidiary of The Northwestern Mutual Life Insurance Company,
under which the Administrator supervises all non-portfolio investment
aspects of the Investment Company's operations and provides adequate
office space and all necessary office equipment and services, including
telephone service, utilities, stationery supplies, and similar items. The
Investment Company pays the Administrator the following fees for services
supplied by the Administrator pursuant to the Administration Agreement:
(i) an annual fee, payable monthly on a pro rata basis, based on the
following percentages of the combined average daily net assets of all
domestic funds: $0 up to and including $500 million - .06%; over $500
million to and including $1 billion - .05%; over $1 billion - .03%, and
(ii) less an amount equal to the sum of certain distribution-related
expenses incurred by the Investment Company's Distributor on behalf of the
Annual Report 19
<PAGE>
SSgA
Yield Plus Fund
Notes to Financial Statements, continued
August 31, 1999
Fund (up to a maximum of 10% for the period September 1, 1997 to December
31, 1997, up to a maximum of 5% for the period January 1, 1998 to December
31, 1998 and 0% thereafter, of the asset-based fee determined in (i)). In
addition, the Fund reimburses the Administrator for out-of-pocket expenses
and start-up costs for new funds.
Distributor and Shareholder Servicing: The Investment Company has a
Distribution Agreement with Russell Fund Distributors (the "Distributor")
which is a wholly-owned subsidiary of the Administrator to promote and
offer shares of the Investment Company. The Distributor may enter into
sub-distribution agreements with other non-related parties. The amounts
paid to the Distributor are included in the accompanying Statement of
Operations.
The Investment Company has a Distribution Plan pursuant to Rule 12b-1 (the
"Plan") under the 1940 Act. Under this Plan, the Investment Company is
authorized to make payments to the Distributor, or any Shareholder
Servicing Agent, as defined in the Plan, for providing distribution and
marketing services, for furnishing assistance to investors on an ongoing
basis, and for the reimbursement of direct out-of-pocket expenses charged
by the Distributor in connection with the distribution and marketing of
shares of the Investment Company and the servicing of investor accounts.
The Fund has service agreements with the Adviser, State Street Brokerage
Services, Inc. ("SSBSI"), a wholly-owned subsidiary of the Adviser, the
Adviser's Retirement Investment Services Division ("RIS"), the Adviser's
Metropolitan Division of Commercial Banking ("Commercial Banking") and
State Street Solutions ("Solutions")(collectively the "Agents"), as well
as several unaffiliated service providers. For these services, the Fund
pays .025%, .175%, .175%, .175%, and .175% to the Adviser, SSBSI, RIS,
Commercial Banking, and Solutions, respectively, based upon the average
daily value of all Fund shares held by or for customers of these Agents.
For the year ended August 31, 1999, the Fund was charged shareholder
servicing expenses of $159,026, $1,248, $38,663 and $95,744, by the
Adviser, SSBSI, Commercial Banking, and Solutions, respectively. The Fund
did not incur any expenses from RIS during this period.
The combined distribution and shareholder servicing payments shall not
exceed .25% of the average daily value of net assets on an annual basis.
The shareholder servicing payments shall not exceed .20% of the average
daily value of net assets on an annual basis. Any payments that exceed the
maximum amount of allowable reimbursement may be carried forward for two
years following the year in which the expenditure was incurred so long as
the plan is in effect. The Fund's responsibility for any such expenses
carried forward shall terminate at the end of two years following the year
in which the expenditure was incurred. The Trustees or a majority of the
Fund's shareholders have the right, however, to terminate the Distribution
Plan and all payments thereunder at any time. The Fund will not be
obligated to reimburse the Distributor for carryover expenses subsequent
to the Distribution Plan's termination or noncontinuance. There were no
carryover expenses as of August 31, 1999.
Board of Trustees: Through May 31, 1999, the Investment Company paid each
Trustee not affiliated with the Investment Company a retainer of $48,000
annually, $1,500 for each board meeting attended, an additional $1,500 for
attending the annual audit committee meeting, and reimbursement for
out-of-pocket expenses. As of June 1, 1999, each Trustee receives $2,500
for each board meeting attended, an additional $2,500 for attending the
annual audit committee meeting and $2,500 for the valuation committee fee
in addition to the $48,000 annual retainer. These expenses are allocated
among all of the Funds based upon their relative net assets.
20 Annual Report
<PAGE>
SSgA
Yield Plus Fund
Notes to Financial Statements, continued
August 31, 1999
Accrued fees payable to affiliates and trustees as of August 31, 1999 were
as follows:
Advisory fees $ 219,759
Administration fees 15,373
Custodian fees 14,310
Distribution fees 3,313
Shareholder servicing fees 18,546
Transfer agent fees 25,195
Trustees' fees 1,832
---------
$ 298,328
=========
Beneficial Interest: As of August 31, 1999, two shareholders (who were
also affiliates of the Investment Company) were record owners of
approximately 52% and 11%, respectively, of the total outstanding shares
of the Fund.
5. Fund Share Transactions (amounts in thousands)
<TABLE>
<CAPTION>
Fiscal Years Ended August 31,
--------------------------------------------------
1999 1998
----------------------- -----------------------
Shares Dollars Shares Dollars
-------- ----------- -------- -----------
<S> <C> <C> <C> <C>
Proceeds from shares sold 91,330 $ 905,446 187,164 $ 1,870,329
Proceeds from reinvestment of
distributions 3,008 29,841 3,401 33,983
Payments for shares redeemed (108,708) (1,078,788) (207,076) (2,069,894)
-------- ----------- -------- -----------
Total net increase (decrease) (14,370) $ (143,501) (16,511) $ (165,582)
======== =========== ======== ===========
</TABLE>
Annual Report 21
<PAGE>
SSgA Yield Plus Fund
One International Place, 27th Floor
Boston, Massachusetts 02110
(800) 997-7327
- --------------------------------------------------------------------------------
Trustees
Lynn L. Anderson, Chairman
William L. Marshall
Steven J. Mastrovich
Patrick J. Riley
Richard D. Shirk
Bruce D. Taber
Henry W. Todd
Officers
Lynn L. Anderson, President, Treasurer and CEO
Mark E. Swanson, Assistant Secretary, Assistant
Treasurer and Principal Accounting Officer
J. David Griswold, Vice President and Secretary
Deedra S. Walkey, Assistant Secretary
Rick J. Chase, Assistant Secretary
Carla L. Anderson, Assistant Secretary
Investment Adviser
State Street Bank and Trust Company
225 Franklin Street
Boston, Massachusetts 02110
Custodian, Transfer Agent and
Office of Shareholder Inquiries
State Street Bank and Trust Company
1776 Heritage Drive
North Quincy, Massachusetts 02171
(800) 647-7327
Distributor
Russell Fund Distributors, Inc.
One International Place, 27th Floor
Boston, Massachusetts 02110
(800) 997-7327
Administrator
Frank Russell Investment Management Company
909 A Street
Tacoma, Washington 98402
Legal Counsel
Goodwin, Procter & Hoar LLP
Exchange Place
Boston, Massachusetts 02109
Independent Accountants
PricewaterhouseCoopers LLP
160 Federal Street
Boston, Massachusetts 02110
22 Annual Report
<PAGE>
SSgA(R) Funds
Bond Market Fund
Annual Report
August 31, 1999
Table of Contents
Page
Chairman's Letter............................................. 4
Portfolio Management Discussion and Analysis.................. 6
Report of Independent Accountants............................. 8
Financial Statements.......................................... 9
Financial Highlights.......................................... 18
Notes to Financial Statements................................. 19
Tax Information............................................... 25
Fund Management and Service Providers......................... 26
"SSgA(R)" is a registered trademark of State Street Corporation and is licensed
for use by the SSgA Funds.
This report is prepared from the books and records of the Fund and it is
submitted for the general information of shareholders. This information is for
distribution to prospective investors only when preceded or accompanied by a
SSgA Funds Prospectus containing more complete information concerning the
investment objective and operations of the Fund, charges and expenses. The
Prospectus should be read carefully before an investment is made.
Performance is historical and assumes reinvestment of all dividends and capital
gains. Investment return and principal value will fluctuate so that an
investor's shares, when redeemed, may be worth more or less than when purchased.
Past performance is not indicative of future results. Russell Fund Distributors,
Inc., is the distributor of the SSgA Funds.
<PAGE>
SSgA Bond Market Fund
- --------------------------------------------------------------------------------
Letter From the Chairman of State Street Global Advisors
- --------------------------------------------------------------------------------
Dear Shareholders,
It is my pleasure to provide you with the SSgA Funds annual report for the
fiscal year ended August 31, 1999. The SSgA Fund family has grown to include
twenty-three portfolios covering a broad range of investment strategies. The
enclosed information provides an overview of the investment process for the SSgA
Bond Market Fund. This overview contains market updates, performance, and
financial information for the Fund. I hope you will find this information a
useful reference as you review your investment strategy.
During the past fiscal year, the SSgA Fund family has opened two new Funds. The
names and investment objectives for these funds are as follows:
The SSgA Aggressive Equity Fund seeks to maximize total return through investing
in US equity securities that are undervalued relative to their growth potential
as measured by SSgA's proprietary models.
The SSgA IAM Shares Fund seeks to maximize total return by investing primarily
in equity securities of companies that have entered into collective bargaining
agreements with the International Association of Machinists and Aerospace
Workers or affiliated labor unions.
Additionally, three SSgA Funds achieved a five-year track record during the 1999
fiscal year. These funds include the two institutional money market funds, SSgA
US Treasury and SSgA Prime Money Market Funds and the SSgA Emerging Markets
Fund. We are proud of our long-term record and look forward to having additional
funds complete their five-year anniversary.
In today's complex global marketplace, we are continually researching new
products and ideas to introduce to our fund family. Here at SSgA, we are
committed to providing a wide range of competitive investment vehicles to
fulfill your investment needs.
I would like to thank you for choosing the SSgA Funds.
Sincerely,
/s/ Nicholas A. Lopardo
Nicholas A. Lopardo
State Street Global Advisors
Chairman and Chief Executive Officer
4 Annual Report
<PAGE>
SSgA Bond Market Fund
- --------------------------------------------------------------------------------
Management of the Funds
- --------------------------------------------------------------------------------
[PHOTO]
Nicholas A. Lopardo
Chairman and Chief Executive Officer
A Team Approach to Investment Management
Our investment strategies are the product of the combined experience of our
professional staff. Portfolio Managers work together to develop and enhance the
techniques that drive our investment processes. As a result, the portfolios we
manage benefit from the knowledge of the entire team.
Mr. John Kirby, Principal, has been the portfolio manager primarily responsible
for investment decisions regarding the SSgA Bond Market Fund since the Fund's
inception. Prior to joining State Street Bank in 1995, Mr. Kirby was an account
manager with Lowell, Blake & Associates. Prior to that he was a portfolio
manager with One Federal Asset Management, and an asset/liability risk
specialist at Cambridge Port Savings. He has a BA from Boston College and is a
CFA candidate. There are six other portfolio managers working with Mr. Kirby.
Annual Report 5
<PAGE>
SSgA Bond Market Fund
- --------------------------------------------------------------------------------
Portfolio Management Discussion and Analysis
- --------------------------------------------------------------------------------
Objective: Maximize total return by investing in fixed income securities.
Invests in: Investment grade debt instruments including: US Government
Treasuries, agencies, corporate bonds, asset-backed securities, mortgage-backed
securities and CMBS.
Strategy: Fund managers make investment decisions to seek to exceed the return
of the Lehman Brothers Aggregate Bond Index. The Fund seeks to match the Index's
duration at all times while adding value through issue and sector selection.
- --------------------------------------------------------------------------------
GROWTH OF A $10,000 INVESTMENT
Dates Bond Market Fund Lehman Brothers Aggregate Bond Index**
Inception* $10,000 $10,000
1996 $9,781 $9,824
1997 $10,707 $10,806
1998 $11,762 $11,949
1999 $11,770 $12,041
================================================================================
Performance Review
For the year ended August 31, 1999, the SSgA Bond Market Fund returned 0.07%
versus 0.80% for its benchmark, the Lehman Brothers Aggregate Bond Index.
Deviation from the benchmark was principally due to payment of operating
expenses by the Fund, whereas the benchmark does not include expenses of any
kind. The Fund seeks to outperform the Index by taking active exposure to
corporate and mortgage securities compared to the benchmark. During the last two
months of the fiscal year, a period of time in which spreads widened, the Fund
was overweight in those two sectors relative to Treasuries.
- --------------------------------------------------------------------------------
SSgA Bond Market Fund
- --------------------------------------------------------------------------------
Period Ended Growth of Total
08/31/99 $10,000 Return
- -------------- ------------ -------
1 Year $ 10,007 0.07%
Inception $ 11,770 4.68%+
- --------------------------------------------------------------------------------
Lehman Brothers Aggregate Bond Index
- --------------------------------------------------------------------------------
Period Ended Growth of Total
08/31/99 $10,000 Return
- -------------- ------------ -------
1 Year $ 10,080 0.80%
Inception $ 12,041 5.33%+
See related Notes on following page.
6 Annual Report
<PAGE>
SSgA Bond Market Fund
- --------------------------------------------------------------------------------
Portfolio Management Discussion and Analysis
- --------------------------------------------------------------------------------
The Fund does not actively seek interest rate risk. The primary source of risk
in the portfolio results from the Fund's sector over/underweight positions
versus the Index. This risk profile is less volatile than one resulting from
active duration management. Over the past twelve months, the portfolio's
tracking error versus the Index fluctuated, as the sector weightings were
reduced or increased in response to changing market conditions.
The interest rate environment was volatile during the fiscal year ended August
31, 1999. The Federal Reserve helped to alleviate the global liquidity crisis in
the second half of calendar 1998 by lowering the Federal Funds rate by 75 basis
points. Absent this crisis, it was widely perceived that the Fed was poised to
raise rates to curtail increasing US economic growth. This surprise turnaround,
coupled with a global flight- to-quality, created a significant decline in US
interest rates through early October 1998 that resulted in the yield on the 10-
year Treasury falling to a low of 4.15. Rates subsequently trended higher, with
the 10-year Treasury yielding 5.98% on August 31, 1999.
Market and Portfolio Highlights
In November 1998, the Fund moved to a slight overweighting in spread products
(asset classes that offer extra yield as compensation for their imbedded risks)
in order to take advantage of the increased risk premium associated with owning
corporate and mortgage securities. At this time, a core Corporate exposure was
opportunistically added in Industrial, Finance, and Yankee securities, with this
position subsequently refined to include a diversified list of issuers. These
Corporate sector and security selections enabled the portfolio to more closely
approximate the Lehman Corporate Index. In May 1999, liquidity diminished as a
Federal Reserve Bank tightening bias caused a two-tier market to develop,
resulting in spreads widening and corporate debt cheapening. In an effort to
maximize what liquidity remained in the market, the Fund focused on corporate
bond issues that had support from the brokerage community. Also at this time,
mortgage spreads widened as a result of volatile Treasury yields and increasing
swap rates.
The Fund was managed consistently with its objective to maximize total return by
investing in fixed income securities, including those represented by the Lehman
Brothers Aggregate Bond Index. On August 31, 1999, the Fund's duration matched
the Index duration of 5.04 years.
The current weightings of the Fund reflect a constructive outlook on the global
financial markets. The perceived risks in the fixed income markets appear to be
outweighed by the generous spreads currently being offered. Consequently, the
Fund continues to be overweight corporate and mortgage-backed securities
relative to the Index.
- --------------------------------------------------------
Top Ten Issuers
(as a percent of Total Investments) August 31, 1999
- --------------------------------------------------------
Federal National Mortgage Association 15.9%
United States Government Treasuries 14.6
Federal Home Loan Bank 12.8
Federal Home Loan Mortgage Corp. 10.6
Government National Mortgage Association 7.8
General Motors Acceptance Corp. 3.1
COMM 1.3
Premier Automobile Trust 1.3
Ford Motor Credit Co. 1.3
Bear Stearns Commercial Mortgage
Securities, Inc. 1.3
- --------------------------------------------------------
---------------------
Notes: The following notes relate to the Growth of $10,000 graph and table on
the preceding page.
* The Bond Market Fund commenced operations on February 7, 1996. Index
comparisons began February 1, 1996.
** The Lehman Brothers Aggregate Bond Index is composed of all bonds covered
by the Lehman Brothers Government/Corporate Bond Index, Mortgage-Backed
Securities Index, and the Asset-Backed Securities Index. Total returns
comprises price appreciation/depreciation and income as a percentage of
the original investment.
+ Annualized.
Performance is historical and assumes reinvestment of all dividends and capital
gains. Investment return and principal value will fluctuate so that an
investor's shares, when redeemed, may be worth more or less than when purchased.
Past performance is not indicative of future results.
Annual Report 7
<PAGE>
Report of Independent Accountants
To the Shareholders and Board of Trustees
of the SSgA Funds:
In our opinion, the accompanying statement of assets and liabilities and
statement of net assets, and the related statements of operations and of changes
in net assets and the financial highlights present fairly, in all material
respects, the financial position of SSgA Bond Market Fund (the "Fund") at August
31, 1999, the results of its operations for the fiscal year then ended and the
changes in its net assets for each of the two fiscal years in the period then
ended, and the financial highlights for each of the three fiscal years in the
period then ended, and for the period February 7, 1996 (commencement of
operations) to August 31, 1996, in conformity with generally accepted accounting
principles. These financial statements and financial highlights (hereafter
referred to as "financial statements") are the responsibility of the Fund's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these financial
statements in accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of securities at August 31, 1999 by correspondence with the
custodian and brokers, provide a reasonable basis for the opinion expressed
above.
Boston, Massachusetts
October 11, 1999
/s/ PricewaterhouseCoopers LLP
8 Annual Report
<PAGE>
SSgA
Bond Market Fund
Statement of Net Assets
August 31, 1999
Principal Market
Amount Value
(000) (000)
$ $
--------- ------
Long-Term Investments - 98.8%
Asset-Backed Securities - 3.3%
CIT RV Trust
Series 1996-B Class A2
6.400% due 02/15/07 96 95
Citibank Credit Card Master Trust I
Series 1998-6 Class A
5.850% due 04/10/03 830 823
Series 1999-1 Class A
5.500% due 02/15/06 650 617
Discover Card Master Trust I
Series 1996-3 Class A
6.050% due 08/18/08 200 189
First USA Credit Card Master Trust
Series 1997-6 Class A
6.420% due 03/17/05 1,000 997
Ford Credit Auto Loan Master Trust
Series 1995-1 Class A
6.500% due 08/15/02 200 201
Honda Automobile Lease Trust
Series 1999-A Class A5
6.650% due 07/15/05 1,100 1,101
MBNA Master Credit Card Trust
Series 1999-G Class A
6.350% due 12/15/06 950 933
Premier Automobile Trust
Series 1999-2 Class A3
5.490% due 02/10/03 4,000 3,941
-------
8,897
-------
Corporate Bonds and Notes - 29.2%
Alltel Corp.
6.650% due 01/15/08 850 817
American Financial Group, Inc.
7.125% due 04/15/09 500 462
Anadarko Petroleum Corp.
7.200% due 03/15/29 200 182
Apache Corp.
7.950% due 04/15/26 500 501
Associates Corp. of North America
6.625% due 05/15/01 500 500
Associates First Capital
7.375% due 08/15/01 1,000 1,013
AT&T Capital Corp.
Series F
6.875% due 01/16/01 (MTN) 1,200 1,200
AT&T Corp.
6.500% due 03/15/29 2,050 1,807
Bank of America Corp.
9.500% due 04/01/01 1,000 1,041
5.875% due 02/15/09 1,000 887
Branch Banking & Trust Co.
5.700% due 02/01/01 915 903
Burlington Northern Santa Fe
7.290% due 06/01/36 1,000 976
Canadian National Railway Co.
6.900% due 07/15/28 750 658
CIT Group, Inc.
5.800% due 03/26/02 (MTN) 500 488
5.910% due 11/10/03 (MTN) 1,000 957
Citigroup, Inc.
9.500% due 03/01/02 285 302
CMS Panhandle Holding Co.
6.500% due 07/15/09 450 416
Coastal Corp.
10.000% due 02/01/01 1,520 1,584
Comcast Cable Communications
6.200% due 11/15/08 500 452
Conoco, Inc.
5.900% due 04/15/04 500 465
6.950% due 04/15/29 200 184
Continental Airlines
Series 99-2
7.256% due 03/15/20 300 286
Continental Cablevision, Inc.
8.300% due 05/15/06 500 518
Dana Corp.
6.250% due 03/01/04 500 483
Annual Report 9
<PAGE>
SSgA
Bond Market Fund
Statement of Net Assets, continued
August 31, 1999
Principal Market
Amount Value
(000) (000)
$ $
--------- ------
Delta Air Lines, Inc.
Series C
6.650% due 03/15/04 (MTN) 500 483
Donaldson, Lufkin & Jenrette, Inc.
6.110% due 05/15/01 (MTN) 500 495
5.875% due 04/01/02 1,000 976
El Paso Energy Corp.
6.750% due 05/15/09 500 468
Enron Corp.
9.650% due 05/15/01 250 261
9.125% due 04/01/03 1,000 1,055
EOP Operating, L.P.
6.500% due 01/15/04 250 239
Equitable Life Assurance Society
6.950% due 12/01/05 500 493
7.700% due 12/01/15 500 508
Financing Corp.
9.400% due 02/08/18 500 626
Firstar Corp.
6.350% due 07/13/01 1,000 994
Fleet National Bank
Series BKNT
5.750% due 01/15/09 1,500 1,332
FMR Corp.
7.570% due 06/15/29 500 488
Ford Motor Co.
7.450% due 07/16/31 2,340 2,285
7.700% due 05/15/97 450 436
Ford Motor Credit Co.
6.375% due 10/06/00 500 499
7.000% due 09/25/01 500 503
6.110% due 12/28/01 (MTN) 900 888
7.500% due 01/15/03 1,000 1,012
5.750% due 02/23/04 1,050 998
Gatx Capital Corp.
6.500% due 11/01/00 1,000 995
General Motors Acceptance Corp.
7.125% due 05/01/01 500 504
5.350% due 05/04/01 (MTN) 2,000 1,960
6.450% due 08/27/01 (MTN) 2,750 2,743
9.625% due 12/15/01 810 858
5.500% due 01/14/02 500 486
6.000% due 02/01/02 1,000 982
5.950% due 03/14/03 1,000 968
5.750% due 11/10/03 1,000 953
Georgia-Pacific Group
7.250% due 06/01/28 300 272
GTE Corp.
9.375% due 12/01/00 800 829
GTE Florida, Inc.
Series E
6.860% due 02/01/28 140 127
GTE North, Inc.
Series H
5.650% due 11/15/08 500 450
Harcourt General, Inc.
7.200% due 08/01/27 400 351
Harrahs Operating Co., Inc.
7.500% due 01/15/09 60 56
Hartford Life, Inc.
7.100% due 06/15/07 1,000 975
IBM Corp.
6.500% due 01/15/28 2,000 1,802
International Paper Co.
6.875% due 04/15/29 400 355
J Seagram & Sons, Inc.
5.790% due 04/15/01 2,000 1,970
Kemper Corp.
6.875% due 09/15/03 345 341
Kroger Co.
6.340% due 06/01/01 1,000 991
6.800% due 12/15/18 300 266
10 Annual Report
<PAGE>
SSgA
Bond Market Fund
Statement of Net Assets, continued
August 31, 1999
Principal Market
Amount Value
(000) (000)
$ $
--------- ------
Lehman Brothers Holdings, Inc.
6.625% due 04/01/04 500 483
Series E
6.375% due 03/15/01 (MTN) 500 496
Liberty Media Group
8.500% due 07/15/29 500 488
Mack-Cali Realty L.P.
7.000% due 03/15/04 1,000 968
Masco Corp.
7.125% due 08/15/13 250 236
6.625% due 04/15/18 250 215
Massachusetts Mutual Life
7.625% due 11/15/23 500 505
MCI WorldCom, Inc.
6.400% due 08/15/05 1,000 961
6.950% due 08/15/28 1,000 927
Mellon Financial Co.
5.750% due 11/15/03 500 474
Midamerican Funding LLC
6.339% due 03/01/09 400 380
Morgan Stanley Dean Witter & Co.
5.625% due 01/20/04 (MTN) 500 473
National City Bank of Cleveland, Ohio
6.350% due 03/15/01 1,000 996
New York Life Insurance Co.
6.400% due 12/15/03 1,500 1,468
News America Holdings, Inc.
9.250% due 02/01/13 750 814
Niagara Mohawk Power Corp.
Series G
7.750% due 10/01/08 500 500
Northrop-Grumman Corp.
9.375% due 10/15/24 400 428
Occidental Petroleum Corp.
7.375% due 11/15/08 600 583
Paine Webber Group, Inc.
6.375% due 05/15/04 1,000 962
Pennzoil-Quaker State Co.
7.375% due 04/01/29 500 459
Pepsi Bottling Group, Inc.
Series B
7.000% due 03/01/29 500 454
Progressive Corp.
6.625% due 03/01/29 200 175
Raytheon Co.
6.300% due 03/15/05 1,000 963
Rohm & Haas Co.
7.850% due 07/15/29 1,000 1,009
Saks, Inc.
8.250% due 11/15/08 1,000 984
Simon Property Group, Inc.
7.125% due 02/09/09 300 276
Sola International, Inc.
6.875% due 03/15/08 150 131
Solutia, Inc.
7.375% due 10/15/27 150 138
Sprint Capital Corp.
6.875% due 11/15/28 1,000 895
Sun Life Canada (US) Capital Trust
8.526% due 05/29/49 (d) 500 485
Suntrust Banks, Inc.
6.125% due 02/15/04 1,300 1,246
Tele-Communications, Inc.
7.875% due 02/15/26 250 258
Time Warner, Inc.
7.250% due 10/15/17 500 474
Tommy Hilfiger USA, Inc.
6.850% due 06/01/08 1,000 915
TRW, Inc.
6.450% due 06/15/01 1,000 996
US Bancorp
7.625% due 05/01/05 500 509
USA Waste Services, Inc.
6.500% due 12/15/02 1,000 929
Vastar Resources, Inc.
6.500% due 04/01/09 500 475
Wal-Mart Stores, Inc.
6.875% due 08/10/09 1,500 1,488
Annual Report 11
<PAGE>
SSgA
Bond Market Fund
Statement of Net Assets, continued
August 31, 1999
Principal Market
Amount Value
(000) (000)
$ $
--------- ------
Weyerhaeuser Co.
7.125% due 07/15/23 200 188
Williams Cos., Inc.
7.625% due 07/15/19 450 432
Xerox Capital Trust I
8.000% due 02/01/27 500 473
Zions Institutional Capital Trust A
8.536% due 12/15/26 400 384
-------
78,448
-------
Eurodollar Bonds - 3.6%
Alberta, Province of
4.875% due 10/29/03 500 468
British Sky Broadcasting
8.200% due 07/15/09 230 225
Cable & Wireless Optus, Ltd.
8.125% due 06/15/09 710 709
Chile, Republic of
6.875% due 04/28/09 100 93
Hyder PLC
6.750% due 12/15/04 1,000 965
Korea Development Bank
7.125% due 04/22/04 1,060 1,014
Korea, Republic of
8.875% due 04/15/08 695 718
Ontario, Province of
7.375% due 01/27/03 1,070 1,092
7.625% due 06/22/04 585 607
Quebec, Province of Canada
5.750% due 02/15/09 1,000 903
Telekomunikacja Polska SA
7.125% due 12/10/03 1,000 978
7.750% due 12/10/08 560 536
Xerox Capital Europe plc
5.750% due 05/15/02 1,500 1,460
-------
9,768
-------
Mortgage-Backed Securities - 40.5%
Bear Stearns Commercial Mortgage
Securities, Inc.
Series 1999-WF2 Class A1
6.800% due 09/15/08 1,893 1,895
Series 1999-WF2 Class A2
7.080% due 06/15/09 1,900 1,912
COMM
Series 1999-1 Class A2
6.455% due 09/15/08 4,300 4,020
DLJ Commercial Mortgage Corp.
Series 1998-CF2 Class A1A
5.880% due 11/12/31 2,202 2,087
Federal Home Loan Mortgage Corp. (b)
7.000% 30 Year TBA 2,300 2,235
7.500% 30 Year TBA 17,490 17,353
Federal Home Loan Mortgage Corp.
Pools
8.500% due 2025 29 30
Federal Home Loan Mortgage Corp. Participation
Certificate
7.000% due 2001 65 65
9.000% due 2004 35 36
9.000% due 2005 266 274
9.000% due 2010 263 273
6.000% due 2011 87 83
8.000% due 2011 92 94
7.000% due 2028 3,063 2,977
7.500% due 2028 503 500
8.500% due 2028 2,073 2,138
6.500% due 2029 6,128 5,803
7.500% due 2029 464 461
Federal National Mortgage Association (b)
6.000% 30 Year TBA 5,000 4,600
6.500% 30 Year TBA 12,225 11,572
7.000% 30 Year TBA 11,075 10,752
7.500% 30 Year TBA 6,800 6,753
8.000% 30 Year TBA 690 699
12 Annual Report
<PAGE>
SSgA
Bond Market Fund
Statement of Net Assets, continued
August 31, 1999
Principal Market
Amount Value
(000) (000)
$ $
--------- ------
Federal National Mortgage
Association Pools
6.000% due 2009 126 121
6.000% due 2011 151 144
5.500% due 2014 160 149
8.000% due 2023 3 3
8.500% due 2024 13 13
7.500% due 2025 66 66
9.000% due 2026 58 61
6.500% due 2027 183 173
8.000% due 2027 3,300 3,343
7.000% due 2028 4,939 4,797
Government National Mortgage
Association (b)
7.500% 30 Year TBA 1,400 1,388
Government National Mortgage
Association Pools
8.000% due 2008 100 103
8.000% due 2012 1,104 1,135
10.000% due 2013 19 21
10.000% due 2014 4 4
7.500% due 2022 11 11
7.000% due 2023 1,895 1,849
7.500% due 2023 34 34
6.500% due 2024 32 30
7.500% due 2024 804 800
8.000% due 2024 273 277
8.500% due 2025 135 139
9.500% due 2025 84 90
8.000% due 2027 17 17
6.000% due 2028 364 333
6.500% due 2028 1,611 1,520
7.000% due 2028 7,377 7,149
7.500% due 2028 1,794 1,780
6.000% due 2029 6,796 6,220
6.500% due 2029 720 680
-------
109,062
-------
United States Government Agencies - 2.5%
Federal Home Loan Bank
7.310% due 06/16/04 1,000 1,025
6.995% due 04/02/07 300 300
Federal National Mortgage Association
5.400% due 05/07/01 (MTN) 2,000 1,974
5.875% due 04/23/04 100 96
8.500% due 02/01/05 1,500 1,512
6.560% due 11/26/07 400 384
6.400% due 05/14/09 1,000 944
State of Israel United States
Government Guaranteed Notes
Series 7-B
5.700% due 02/15/03 500 488
-------
6,723
-------
United States Government
Treasuries - 16.4%
United States Treasury Bonds
10.000% due 05/15/10 320 375
9.875% due 11/15/15 380 509
8.875% due 08/15/17 1,350 1,688
8.125% due 08/15/19 3,645 4,304
7.625% due 11/15/22 3,635 4,148
5.250% due 11/15/28 495 429
5.250% due 02/15/29 5,330 4,662
3.875% due 04/15/29 2,500 2,433
United States Treasury Notes
5.500% due 08/31/01 4,500 4,480
6.250% due 02/28/02 1,000 1,010
6.250% due 06/30/02 1,000 1,010
5.875% due 09/30/02 2,280 2,280
5.500% due 05/31/03 300 296
6.000% due 08/15/04 9,040 9,088
6.500% due 05/15/05 500 510
5.875% due 11/15/05 500 494
7.000% due 07/15/06 3,000 3,135
6.000% due 08/15/09 2,040 2,042
Annual Report 13
<PAGE>
SSgA
Bond Market Fund
Statement of Net Assets, continued
August 31, 1999
Principal Market
Amount Value
(000) (000)
$ $
--------- ------
United States Treasury Strips
5.890% due 02/15/10 2,500 1,284
-------
44,177
-------
Yankee Bonds - 3.3%
Abitibi-Consolidated, Inc.
8.500% due 08/01/29 250 240
AT&T Canada, Inc.
12.000% due 08/15/07 500 568
Banco Santiago SA
7.000% due 07/18/07 300 255
Manitoba, Province of
9.500% due 10/01/00 351 363
Series CN
8.750% due 05/15/01 1,000 1,036
New Brunswick, Province of
7.125% due 10/01/02 500 505
Petroleum Geo-Services
7.125% due 03/30/28 200 174
8.150% due 07/15/29 100 98
Quebec, Province of
11.000% due 06/15/15 1,000 1,072
Royal Caribbean Cruises, Ltd.
6.750% due 03/15/08 200 183
Saskatchewan, Province of
6.625% due 07/15/03 1,000 995
Svenska Handelsbanken
8.350% due 07/15/04 500 529
Tyco International Group SA
6.125% due 06/15/01 2,000 1,973
6.875% due 01/15/29 500 441
Westpac Banking, Ltd.
9.125% due 08/15/01 500 523
-------
8,955
-------
Total Long-Term Investments
(cost $273,473) 266,030
-------
Short-Term Investments - 13.9%
Dreyfus Cash Management Plus, Inc.
Money Market Fund (a) 6 6
Federal Home Loan Bank
Consolidated Discount Note
5.080% due 09/15/99 (a)(c) 37,500 37,426
Federated Investors Prime Cash
Obligations Fund (a) 66 67
-------
Total Short-Term Investments
(cost $37,499) 37,499
-------
Total Investments - 112.7%
(identified cost $310,972) 303,529
Other Assets and Liabilities,
Net - (12.7%) (34,245)
-------
Net Assets - 100.0% 269,284
=======
(a) At cost, which approximates market.
(b) Forward commitment.
(c) Rate noted is yield-to-maturity (Unaudited).
(d) Perpetual floating rate note.
Abbreviations:
MTN - Medium Term Note
TBA - To Be Announced Security
See the accompanying notes which are an integral part of the financial
statements.
14 Annual Report
<PAGE>
SSgA
Bond Market Fund
Statement of Assets and Liabilities
Amounts in thousands (except per share amount) August 31, 1999
<TABLE>
<S> <C> <C>
Assets
Investments at market (identified cost $310,972) ............................... $ 303,529
Receivables:
Dividends and interest ...................................................... 2,740
Investments sold (regular settlement) ....................................... 10,249
Investments sold (delayed settlement) ....................................... 20,540
Fund shares sold ............................................................ 127
----------
Total Assets ............................................................. 337,185
Liabilities
Payables:
Investments purchased (regular settlement) .................. $ 3,281
Investments purchased (delayed settlement) .................. 63,262
Fund shares redeemed ........................................ 1,154
Accrued fees to affiliates .................................. 161
Other accrued expenses ...................................... 43
----------
Total Liabilities ........................................................ 67,901
----------
Net Assets ..................................................................... $ 269,284
==========
Net Assets Consist of:
Undistributed net investment income ............................................ $ 3,831
Accumulated distributions in excess of net realized gain ....................... (5,227)
Unrealized appreciation (depreciation) on investments .......................... (7,443)
Shares of beneficial interest .................................................. 28
Additional paid-in capital ..................................................... 278,095
----------
Net Assets ..................................................................... $ 269,284
==========
Net Asset Value, offering and redemption price per share:
($269,283,507 divided by 27,951,327 shares of $.001 par value
shares of beneficial interest outstanding) ............................... $ 9.63
==========
</TABLE>
See the accompanying notes which are an integral part of the financial
statements.
Annual Report 15
<PAGE>
SSgA
Bond Market Fund
Statement of Operations
Amounts in thousands For the Fiscal Year Ended August 31, 1999
<TABLE>
<S> <C> <C>
Investment Income
Interest .................................................................... $ 12,648
Dividends ................................................................... 522
----------
Total Investment Income .................................................. 13,170
Expenses
Advisory fees ................................................ $ 659
Administrative fees .......................................... 69
Custodian fees ............................................... 106
Distribution fees ............................................ 76
Transfer agent fees .......................................... 39
Professional fees ............................................ 15
Registration fees ............................................ 55
Shareholder servicing fees ................................... 64
Trustees' fees ............................................... 5
Miscellaneous ................................................ 9
----------
Total Expenses ........................................................... 1,097
----------
Net investment income .......................................................... 12,073
----------
Net Realized and Unrealized Gain (Loss)
Net realized gain (loss) on investments ........................................ (3,422)
Net change in unrealized appreciation (depreciation) on investments ............ (9,931)
----------
Net realized and unrealized gain (loss) ........................................ (13,353)
----------
Net increase (decrease) in net assets resulting from operations ................ $ (1,280)
==========
</TABLE>
See the accompanying notes which are an integral part of the financial
statements.
16 Annual Report
<PAGE>
SSgA
Bond Market Fund
Statement of Changes in Net Assets
Amounts in thousands For the Fiscal Years Ended August 31,
<TABLE>
<CAPTION>
1999 1998
---------- ----------
<S> <C> <C>
Increase (Decrease) in Net Assets
Operations
Net investment income ................................................ $ 12,073 $ 7,585
Net realized gain (loss) ............................................. (3,422) 2,055
Net change in unrealized appreciation (depreciation) ................. (9,931) 2,334
---------- ----------
Net increase (decrease) in net assets resulting from operations ... (1,280) 11,974
---------- ----------
Distributions
From net investment income ........................................... (10,558) (6,281)
From net realized gain on investments ................................ -- (350)
In excess of net realized gain on investments ........................ (3,345) --
---------- ----------
Net decrease from distributions ................................... (13,903) (6,631)
---------- ----------
Share Transactions
Net increase (decrease) in net assets from share transactions ........ 94,316 97,138
---------- ----------
Total Net Increase (Decrease) in Net Assets ............................. 79,133 102,481
Net Assets
Beginning of period .................................................. 190,151 87,670
---------- ----------
End of period (including undistributed net investment income of
$3,831 and $2,322, respectively) .................................. $ 269,284 $ 190,151
========== ==========
</TABLE>
See the accompanying notes which are an integral part of the financial
statements.
Annual Report 17
<PAGE>
SSgA
Bond Market Fund
Financial Highlights
The following table includes selected data for a share outstanding throughout
each period and other performance information derived from the financial
statements.
<TABLE>
<CAPTION>
Fiscal Years Ended August 31,
----------------------------------------------------
1999 1998 1997 1996*
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period ............ $ 10.35 $ 9.97 $ 9.63 $ 10.00
---------- ---------- ---------- ----------
Income From Operations
Net investment income (a) .................... .54 .55 .53 .27
Net realized and unrealized gain (loss) ...... (.52) .40 .35 (.49)
---------- ---------- ---------- ----------
Total Income From Operations .............. .02 .95 .88 (.22)
---------- ---------- ---------- ----------
Distributions
From net investment income ................... (.54) (.54) (.54) (.15)
From net realized gain on investments ........ (.20) (.03) -- --
---------- ---------- ---------- ----------
Total Distributions ....................... (.74) (.57) (.54) (.15)
---------- ---------- ---------- ----------
Net Asset Value, End of Period .................. $ 9.63 $ 10.35 $ 9.97 $ 9.63
========== ========== ========== ==========
Total Return (%)(b) ............................. .07 9.86 9.47 (2.19)
Ratios/Supplemental Data:
Net Assets, end of period ($ in thousands) ... 269,284 190,151 87,670 29,015
Ratios to average net assets (%)(c):
Operating expenses, net (d) ............... .50 .48 .50 .63
Operating expenses, gross (d) ............. .50 .52 .74 .93
Net investment income ..................... 5.50 5.74 6.05 5.66
Portfolio turnover rate (%)(c) ............... 327.83 300.77 375.72 253.30
</TABLE>
* For the period February 7, 1996 (commencement of operations) to August 31,
1996.
(a) For the period subsequent to August 31, 1998, average month-end shares
outstanding were used for this calculation.
(b) Periods less than one year are not annualized.
(c) The ratios for the period ended August 31, 1996 are annualized.
(d) See Note 4 for current period amounts.
18 Annual Report
<PAGE>
SSgA
Bond Market Fund
Notes to Financial Statements
August 31, 1999
1. Organization
The SSgA Funds (the "Investment Company") is a series mutual fund,
currently comprised of 23 investment portfolios which are in operation as
of August 31, 1999. These financial statements report on one portfolio,
the SSgA Bond Market Fund (the "Fund"). The Investment Company is a
registered and diversified open-end investment company, as defined in the
Investment Company Act of 1940, as amended (the "1940 Act"), that was
organized as a Massachusetts business trust on October 3, 1987 and
operates under a First Amended and Restated Master Trust Agreement, dated
October 13, 1993, as amended (the "Agreement"). The Investment Company's
Agreement permits the Board of Trustees to issue an unlimited number of
full and fractional shares of beneficial interest at a $.001 par value.
2. Significant Accounting Policies
The Fund's financial statements are prepared in accordance with generally
accepted accounting principles which require the use of management
estimates. The following is a summary of the significant accounting
policies consistently followed by the Fund in the preparation of its
financial statements.
Security valuation: United States fixed-income securities listed and
traded principally on any national securities exchange are valued on the
basis of the last sale price or, lacking any sale, at the closing bid
price, on the primary exchange on which the security is traded. United
States over-the-counter, fixed-income securities and options are valued on
the basis of the closing bid price.
Many fixed-income securities do not trade each day, and thus last sale or
bid prices are frequently not available. Fixed-income securities may be
valued using prices provided by a pricing service when such prices are
believed to reflect the market value of such securities.
Money market instruments maturing within 60 days of the valuation date are
valued at amortized cost, a method by which each portfolio instrument is
initially valued at cost, and thereafter a constant accretion/amortization
to maturity of any discount or premium is assumed, unless the Board of
Trustees determines that amortized cost does not represent fair value.
The Fund may value securities for which market quotations are not readily
available at "fair value," as determined in good faith pursuant to
procedures established by the Board of Trustees.
Securities transactions: Securities transactions are recorded on a trade
date basis. Realized gains and losses from securities transactions are
recorded on the basis of identified cost.
Investment income: Dividend income is recorded on the ex-dividend date and
interest income is recorded daily on the accrual basis.
Amortization and accretion: All zero-coupon bond discounts and original
issue discounts are accreted for both tax and financial reporting
purposes. All short- and long-term market premiums/discounts are
amortized/accreted for both tax and financial reporting purposes.
Annual Report 19
<PAGE>
SSgA
Bond Market Fund
Notes to Financial Statements, continued
August 31, 1999
Federal income taxes: Since the Investment Company is a Massachusetts
business trust, each fund is a separate corporate taxpayer and determines
its net investment income and capital gains (or losses) and the amounts to
be distributed to each fund's shareholders without regard to the income
and capital gains (or losses) of the other funds.
It is the Fund's intention to qualify as a regulated investment company,
as defined by the Internal Revenue Code of 1986, as amended. This requires
the Fund to distribute all of its taxable income. Therefore, the Fund paid
no federal income taxes and no federal income tax provision was required.
As permitted by tax regulations, the Fund intends to defer a net realized
capital loss of $5,238,860 incurred from November 1, 1998 to August 31,
1999, and treat it as arising in the fiscal year 2000.
The Fund's aggregate cost of investments and the composition of unrealized
appreciation and depreciation of investment securities for federal income
tax purposes as of August 31, 1999 are as follows:
Net Unrealized
Federal Tax Unrealized Unrealized Appreciation
Cost Appreciation (Depreciation) (Depreciation)
------------ ------------ ------------- -------------
$310,971,431 $ 480,147 $ (7,922,831) $ (7,442,684)
Dividends and distributions to shareholders: Income dividends and capital
gain distributions, if any, are recorded on the ex-dividend date.
Dividends are generally declared and paid quarterly. Capital gain
distributions are generally declared and paid annually. An additional
distribution may be paid by the Fund to avoid imposition of federal income
tax on any remaining undistributed net investment income and capital
gains.
The timing and characterization of certain income and capital gain
distributions are determined in accordance with federal tax regulations
which may differ from generally accepted accounting principles ("GAAP").
As a result, net investment income and net realized gain (or loss) on
investment transactions for a reporting period may differ significantly
from distributions during such period. The differences between tax
regulations and GAAP relate primarily to investment in certain fixed
income securities purchased at a discount, mortgage-backed securities and
certain securities sold at a loss. Accordingly, the Fund may periodically
make reclassifications among certain of its capital accounts without
impacting its net asset value.
Expenses: Most expenses can be directly attributed to the Fund. Expenses
which cannot be directly attributed are allocated among all funds based
principally on their relative net assets.
Deferred organization expenses: The Fund incurred expenses in connection
with its organization. These costs were deferred and are being amortized
over 60 months on a straight-line basis.
Forward commitments/Mortgage dollar rolls: The Fund may contract to
purchase securities for a fixed price at a future date beyond customary
settlement time (not to exceed 120 days)(i.e., a "forward commitment" or
"delayed settlement" transaction, e.g., to be announced ("TBA"))
consistent with a Fund's ability to manage its investment portfolio and
meet redemption requests. For example, the Fund may enter into mortgage
dollar rolls (principally in TBA's) in which the Fund purchases a mortgage
security and sells a similar mortgage security
20 Annual Report
<PAGE>
SSgA
Bond Market Fund
Notes to Financial Statements, continued
August 31, 1999
before settlement of the purchased mortgage security occurs. The Fund may
realize a short-term gain (or loss), based on market movements, upon such
sale. When effecting such transactions, cash or liquid high-grade debt
obligations of the Fund will be segregated on the Fund's records in a
dollar amount sufficient to make payment for the portfolio securities to
be purchased at the trade date and maintained until the transaction is
settled. A forward commitment transaction involves a risk of loss if the
value of the security to be purchased declines prior to the settlement
date or the other party to the transaction fails to complete the
transaction.
3. Securities Transactions
Investment transactions: For the year ended August 31, 1999, purchases and
sales of investment securities, excluding US Government and Agency
obligations and short-term investments, aggregated to $171,213,107 and
$109,226,989, respectively.
For the year ended August 31, 1999, purchases and sales of US Government
and Agency obligations, excluding short-term investments, aggregated to
$612,020,315 and $602,859,462, respectively.
Securities Lending: Effective December 17, 1998, the Investment Company
started its securities lending program. The program allows each Fund to
loan securities with a value up to 33 1/3% of its total assets to certain
brokers. The Fund receives cash (U.S. currency), U.S. Government or U.S.
Government agency obligations as collateral against the loaned securities.
To the extent that a loan is secured by cash collateral, such collateral
shall be invested by State Street Bank and Trust Company in short-term
instruments, money market mutual funds, and such other short-term
investments, provided the investments meet certain quality and
diversification requirements. Under the securities lending arrangement,
the collateral received is recorded on the Fund's statement of assets and
liabilities along with the related obligation to return the collateral. In
those situations where the Company has relinquished control of securities
transferred, it derecognizes the securities and records a receivable from
the counterparty.
Income generated from the investment of cash collateral, less negotiated
rebate fees paid to participating brokers and transaction costs, is
divided between the Fund and State Street Bank and Trust Company and is
recorded as interest income for the Fund. To the extent that a loan is
secured by non-cash collateral, brokers pay the Fund negotiated lenders'
fees, which are divided between the Fund and State Street Bank and Trust
Company and are recorded as interest income for the Fund. All collateral
received will be in an amount at least equal to 102% (for loans of U.S.
securities) or 105% (for non-U.S. securities) of the market value of the
loaned securities at the inception of each loan. Should the borrower of
the securities fail financially, there is a risk of delay in recovery of
the securities or loss of rights in the collateral. Consequently, loans
are made only to borrowers which are deemed to be of good financial
standing. As of August 31, 1999, there were no outstanding securities on
loan.
4. Related Parties
Adviser: The Investment Company has an investment advisory agreement with
State Street Bank and Trust Company under which the Adviser directs the
investments of the Fund in accordance with its investment objectives,
policies, and limitations. For these services, the Fund pays a fee to the
Adviser, calculated daily and paid monthly, at the annual rate of .30% of
its average daily net assets. The Adviser has agreed to reimburse the Fund
for all expenses in excess of .50% of average daily net assets on an
annual basis. The Investment Company
Annual Report 21
<PAGE>
SSgA
Bond Market Fund
Notes to Financial Statements, continued
August 31, 1999
also has contracts with the Adviser to provide custody, shareholder
servicing and transfer agent services to the Fund. These amounts are
presented in the accompanying Statement of Operations.
In addition, the Fund has entered into arrangements with its Adviser
whereby credits realized as a result of uninvested cash balances were used
to reduce a portion of the Fund's expenses. During the period, the Fund's
custodian fees were reduced by $7,142 under these arrangements.
Administrator: The Investment Company has an administration agreement with
Frank Russell Investment Management Company (the "Administrator"), a
wholly owned subsidiary of The Northwestern Mutual Life Insurance Company,
under which the Administrator supervises all non-portfolio investment
aspects of the Investment Company's operations and provides adequate
office space and all necessary office equipment and services, including
telephone service, utilities, stationery supplies, and similar items. The
Investment Company pays the Administrator the following fees for services
supplied by the Administrator pursuant to the Administration Agreement:
(i) an annual fee, payable monthly on a pro rata basis, based on the
following percentages of the average daily net assets of all domestic
funds: $0 up to and including $500 million - .06%; over $500 million to
and including $1 billion - .05%; over $1 billion - .03%, and (ii) less an
amount equal to the sum of certain distribution-related expenses incurred
by the Investment Company's Distributor on behalf of the Fund (up to a
maximum of 10%, for the period September 1, 1997 to December 31, 1997, up
to a maximum of 5% for the period January 1, 1998 to December 31, 1998 and
0% thereafter, of the asset-based fee determined in (i)). In addition, the
Fund reimburses the Administrator for out-of-pocket expenses and start-up
costs for new funds.
Distributor and Shareholder Servicing: The Investment Company has a
Distribution Agreement with Russell Fund Distributors (the "Distributor")
which is a wholly-owned subsidiary of the Administrator to promote and
offer shares of the Investment Company. The Distributor may enter into
sub-distribution agreements with other non-related parties. The amounts
paid to the Distributor are included in the accompanying Statement of
Operations.
The Investment Company has a Distribution Plan pursuant to Rule 12b-1 (the
"Plan") under the 1940 Act. Under this Plan, the Investment Company is
authorized to make payments to the Distributor, or any Shareholder
Servicing Agent, as defined in the Plan, for providing distribution and
marketing services, for furnishing assistance to investors on an ongoing
basis, and for the reimbursement of direct out-of-pocket expenses charged
by the Distributor in connection with the distribution and marketing of
shares of the Investment Company and the servicing of investor accounts.
The Fund has service agreements with the Adviser, the Adviser's Retirement
Investment Services Division ("RIS"), the Adviser's Metropolitan Division
of Commercial Banking ("Commercial Banking") and State Street Solutions
("Solutions")(collectively the "Agents"), as well as several unaffiliated
service providers. For these services, the Fund pays .025%, .050%, .050%,
and .100% to the Adviser, RIS, Commercial Banking, and Solutions,
respectively, based upon the average daily value of all Fund shares held
by or for customers of these Agents. For the year ended August 31, 1999,
the Fund was charged shareholder servicing expenses of $40,428, $25, $33
and $23,894, by the Adviser, SSBI, RIS and Solutions.
22 Annual Report
<PAGE>
SSgA
Bond Market Fund
Notes to Financial Statements, continued
August 31, 1999
The combined distribution and shareholder servicing payments shall not
exceed .25% of the average daily value of net assets on an annual basis.
The shareholder servicing payments shall not exceed .20% of the average
daily value of net assets on an annual basis. Any payments that exceed the
maximum amount of allowable reimbursement may be carried forward for two
years following the year in which the expenditure was incurred so long as
the plan is in effect. The Fund's responsibility for any such expenses
carried forward shall terminate at the end of two years following the year
in which the expenditure was incurred. The Trustees or a majority of the
Fund's shareholders have the right, however, to terminate the Distribution
Plan and all payments thereunder at any time. The Fund will not be
obligated to reimburse the Distributor for carryover expenses subsequent
to the Distribution Plan's termination or noncontinuance. There were no
carryover expenses as of August 31, 1999.
Board of Trustees: Through May 31, 1999, the Investment Company paid each
Trustee not affiliated with the Investment Company a retainer of $48,000
annually, $1,500 for each board meeting attended, an additional $1,500 for
attending the annual audit committee meeting, and reimbursement for
out-of-pocket expenses. As of June 1, 1999, each Trustee receives $2,500
for each board meeting attended, an additional $2,500 for attending the
annual audit committee meeting and $2,500 for the valuation committee fee
in addition to the $48,000 annual retainer. These expenses are allocated
among all of the Funds based upon their relative net assets.
Accrued fees payable to affiliates and trustees as of August 31, 1999 were
as follows:
Advisory fees $ 135,393
Administration fees 7,270
Custodian fees 5,524
Distribution fees 1,374
Shareholder servicing fees 6,468
Transfer agent fees 4,827
Trustees' fees 451
----------
$ 161,307
==========
Beneficial Interest: As of August 31, 1999, one shareholder (who is also a
series of the Investment Company) was a record owner of approximately 13%
of the total outstanding shares of the Fund.
5. Fund Share Transactions (amounts in thousands)
<TABLE>
<CAPTION>
Fiscal Years Ended August 31,
----------------------------------------------------
1999 1998
------------------------ ------------------------
Shares Dollars Shares Dollars
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Proceeds from shares sold ...................... 18,503 $ 184,824 13,299 $ 134,745
Proceeds from reinvestment of distributions .... 934 9,418 366 3,664
Payments for shares redeemed ................... (9,860) (99,926) (4,086) (41,271)
---------- ---------- ---------- ----------
Total net increase (decrease) .................. 9,577 $ 94,316 9,579 $ 97,138
========== ========== ========== ==========
</TABLE>
Annual Report 23
<PAGE>
SSgA
Bond Market Fund
Notes to Financial Statements, continued
August 31, 1999
6. Line of Credit
The Fund and several affiliated Funds (the "Participants") share in a $50
million revolving credit facility for temporary or emergency purposes,
including the meeting of redemption requests that otherwise might require
the untimely disposition of securities. The Participants are charged an
annual commitment fee of .09% (.065% prior to July 15, 1999) on the
average daily unused amount of the aggregate commitment, which is
allocated among each of the Participants. Interest, at the Federal Fund
Rate plus .50% annually, is calculated based on the market rates at the
time of the borrowing. The Fund may borrow up to a maximum of 33 1/3
percent of the value of its net assets under the agreement. The Fund did
not have any drawdowns during the year.
7. Dividends
On September 1, 1999, the Board of Trustees declared a dividend of $0.1316
from net investment income, payable on September 7, 1999 to shareholders
of record on September 2, 1999.
24 Annual Report
<PAGE>
SSgA
Bond Market Fund
Tax Information
August 31, 1999 (Unaudited)
The Fund paid distributions of $603,762 from net long-term capital gains during
its taxable year ended August 31, 1999.
Please consult a tax advisor for questions about federal or state income tax
laws.
Annual Report 25
<PAGE>
SSgA Bond Market Fund
One International Place, 27th Floor
Boston, Massachusetts 02110
(800) 997-7327
- --------------------------------------------------------------------------------
Trustees
Lynn L. Anderson, Chairman
William L. Marshall
Steven J. Mastrovich
Patrick J. Riley
Richard D. Shirk
Bruce D. Taber
Henry W. Todd
Officers
Lynn L. Anderson, President, Treasurer and CEO
Mark E. Swanson, Assistant Secretary, Assistant
Treasurer and Principal Accounting Officer
J. David Griswold, Vice President and Secretary
Deedra S. Walkey, Assistant Secretary
Rick J. Chase, Assistant Secretary
Carla L. Anderson, Assistant Secretary
Investment Adviser
State Street Bank and Trust Company
225 Franklin Street
Boston, Massachusetts 02110
Custodian, Transfer Agent and
Office of Shareholder Inquiries
State Street Bank and Trust Company
1776 Heritage Drive
North Quincy, Massachusetts 02171
(800) 647-7327
Distributor
Russell Fund Distributors, Inc.
One International Place, 27th Floor
Boston, Massachusetts 02110
(800) 997-7327
Administrator
Frank Russell Investment Management Company
909 A Street
Tacoma, Washington 98402
Legal Counsel
Goodwin, Procter & Hoar LLP
Exchange Place
Boston, Massachusetts 02109
Independent Accountants
PricewaterhouseCoopers LLP
160 Federal Street
Boston, Massachusetts 02110
26 Annual Report
<PAGE>
SSgA(R) Funds
S&P 500 Index Fund
Annual Report
August 31, 1999
Table of Contents
Page
Chairman's Letter............................................... 4
Portfolio Management Discussion and Analysis.................... 6
Report of Independent Accountants............................... 8
Financial Statements............................................ 9
Financial Highlights............................................ 21
Notes to Financial Statements................................... 22
Tax Information................................................. 28
Fund Management and Service Providers........................... 29
"SSgA(R)" is a registered trademark of State Street Corporation and is licensed
for use by the SSgA Funds.
This report is prepared from the books and records of the Fund and it is
submitted for the general information of shareholders. This information is for
distribution to prospective investors only when preceded or accompanied by a
SSgA Funds Prospectus containing more complete information concerning the
investment objective and operations of the Fund, charges and expenses. The
Prospectus should be read carefully before an investment is made.
Performance is historical and assumes reinvestment of all dividends and capital
gains. Investment return and principal value will fluctuate so that an
investor's shares, when redeemed, may be worth more or less than when purchased.
Past performance is not indicative of future results. Russell Fund Distributors,
Inc., is the distributor of the SSgA Funds.
<PAGE>
SSgA S&P 500 Index Fund
- --------------------------------------------------------------------------------
Letter From the Chairman of State Street Global Advisors
- --------------------------------------------------------------------------------
Dear Shareholders,
It is my pleasure to provide you with the SSgA Funds annual report for the
fiscal year ended August 31, 1999. The SSgA Fund family has grown to include
twenty-three portfolios covering a broad range of investment strategies. The
enclosed information provides an overview of the investment process for the SSgA
S&P 500 Index Fund. This overview contains market updates, performance, and
financial information for the Fund. I hope you will find this information a
useful reference as you review your investment strategy.
During the past fiscal year, the SSgA Fund family has opened two new Funds. The
names and investment objectives for these funds are as follows:
The SSgA Aggressive Equity Fund seeks to maximize total return through investing
in US equity securities that are undervalued relative to their growth potential
as measured by SSgA's proprietary models.
The SSgA IAM Shares Fund seeks to maximize total return by investing primarily
in equity securities of companies that have entered into collective bargaining
agreements with the International Association of Machinists and Aerospace
Workers or affiliated labor unions.
Additionally, three SSgA Funds achieved a five-year track record during the 1999
fiscal year. These funds include the two institutional money market funds, SSgA
US Treasury and SSgA Prime Money Market Funds and the SSgA Emerging Markets
Fund. We are proud of our long-term record and look forward to having additional
funds complete their five-year anniversary.
In today's complex global marketplace, we are continually researching new
products and ideas to introduce to our fund family. Here at SSgA, we are
committed to providing a wide range of competitive investment vehicles to
fulfill your investment needs.
I would like to thank you for choosing the SSgA Funds.
Sincerely,
/s/ Nicholas A. Lopardo
Nicholas A. Lopardo
State Street Global Advisors
Chairman and Chief Executive Officer
4 Annual Report
<PAGE>
SSgA S&P 500 Index Fund
- --------------------------------------------------------------------------------
Management of the Funds
- --------------------------------------------------------------------------------
[PHOTO]
Nicholas A. Lopardo
Chairman and Chief Executive Officer
A Team Approach to Investment Management
Our investment strategies are the product of the combined experience of our
professional staff. Portfolio Managers work together to develop and enhance the
techniques that drive our investment processes. As a result, the portfolios we
manage benefit from the knowledge of the entire team.
Mr. James May, Principal, has been the portfolio manager primarily responsible
for investment decisions regarding the SSgA S&P 500 Index Fund since May 1995.
Mr. May has been a portfolio manager in the US Structured Products Group of
State Street since January 1994. He served as an Investment Support Analyst in
the US Passive Services Group from 1991 to 1993. He holds a BS in Finance from
Bentley College and an MBA from Boston College. There are four other portfolio
managers working with Mr. May.
Annual Report 5
<PAGE>
SSgA S&P 500 Index Fund
- --------------------------------------------------------------------------------
Portfolio Management Discussion and Analysis
- --------------------------------------------------------------------------------
Objective: To replicate the total return of the S&P 500 Index.
Invests in: Equity securities.
Strategy: The Fund's holdings are composed of the 500 stocks in the S&P 500(R)
Index. The Index is designed to capture the price performance of a large
cross-section of the US publicly traded stock market.
- --------------------------------------------------------------------------------
GROWTH OF A $10,000 INVESTMENT
Dates S&P 500 Index Fund S&P 500(R) Index**
Inception* $10,000 $10,000
1993 $10,806 $10,842
1994 $11,377 $11,435
1995 $13,779 $13,887
1996 $16,323 $16,488
1997 $22,901 $23,191
1998 $24,713 $25,068
1999 $34,480 $35,054
================================================================================
Performance Review
The SSgA S&P 500 Index Fund seeks to replicate the total return of the S&P
500(R) Index. To accomplish this, the Fund utilizes a full replication approach.
With this strategy, the Fund seeks to hold each security in the S&P 500 Index in
the same capitalization weight as it appears in the Index. The Fund's
performance is net of operating expenses, whereas Index results do not include
expenses of any kind.
The Fund closed the fiscal year with a 39.52% return for the twelve months ended
August 31, 1999. This closely mirrors the S&P 500 Index return of 39.84% for the
same period. The Manager's full replication approach allows the Fund's
performance to be very similar to the results of the Index. The slight deviation
from the benchmark return is attributable to the Fund's payment of operating
expenses, with subsequent performance being reported on a net of fee basis.
Index results are reported on a gross of fee basis, and as such, do not reflect
fees or expenses of any kind.
- --------------------------------------------------------------------------------
SSgA S&P 500 Index Fund
- --------------------------------------------------------------------------------
Period Ended Growth of Total
08/31/99 $10,000 Return
- -------------- ------------ -------
1 Year $ 13,952 39.52%
5 Years $ 30,311 24.83%+
Inception $ 34,480 20.40%+
- --------------------------------------------------------------------------------
Standard & Poor's(R) 500 Composite Stock Price Index
- --------------------------------------------------------------------------------
Period Ended Growth of Total
08/31/99 $10,000 Return
- -------------- ------------ -------
1 Year $ 13,984 39.84%
5 Years $ 30,656 25.11%+
Inception $ 35,054 20.70%+
See related Notes on following page.
6 Annual Report
<PAGE>
SSgA S&P 500 Index Fund
- --------------------------------------------------------------------------------
Portfolio Management Discussion and Analysis
- --------------------------------------------------------------------------------
Market and Portfolio Highlights
The 500 stocks of the S&P 500 Index represent approximately 79% of the market
value of all US common stocks. Standard and Poor's Corporation chooses the 500
stocks to capture the price performance of a large cross-section of the US
publicly traded stock market. The Index is also structured to approximate the
general distribution of industries in the US economy and does not necessarily
represent the 500 largest companies.
Low inflation and low unemployment continued to drive the US equity markets
forward over the past year. Large capitalization stocks continued to be the
beneficiaries of the US equity rally that began in 1994. The S&P 500 Index
recorded another strong year with a return of 39.84%, while the Russell 1000
Index gained 39.35%. The returns of large cap growth stocks continued to
dominate large cap value issues, as the S&P BARRA Growth Index returned 44.76%,
and the S&P BARRA Value Index gaining 34.10% for the prior fiscal year. Small
cap stocks, as measured by the Russell 2000 Index, also performed well, posting
a return of 28.36%.
Although the preemptive 0.25% interest rate hikes orchestrated by the Fed on
June 30 and August 24, 1999, were viewed positively by many as an attempt to
keep the economy expanding in a controlled manner, the market did pull back in
response to inflation fears. The rally stalled during July and August 1999, when
the S&P 500 Index posted negative returns for two consecutive months of -3.12%
and -0.49%, respectively. Small cap issues suffered a bit more, as the Russell
2000 lost 2.74% and 3.70%, for the same two months.
Over the past fiscal year, the S&P 500 Index continued to grow, with total
capitalization increasing by over $2 trillion, to more than $10.8 trillion.
Reflecting the excellent performance of the Technology sector, the largest
company in the S&P 500 is now Microsoft with a capitalization of $472.4 billion,
which has doubled in size since the end of the 1998 fiscal year. Although
Microsoft surpassed General Electric as the largest stock in the S&P 500 Index,
GE has also grown tremendously. GE's market capitalization is now $367.4
billion, an increase of over $100 billion from last year.
Driven by companies such as Microsoft, IBM, Lucent Technologies, and AOL, the
Technology sector was the best performing sector over the past year, posting a
return of 99.54%. Those companies are among the largest constituents of the S&P
500 Index, as Microsoft has an Index weight of 4.3%, IBM at 2.1%, and Lucent and
AOL currently at 1.8% and 1.0%, respectively. Technology, with an benchmark
relative weight of 23%, performed much better than the next best sector,
Communications Services, which posted a return of 49.08%. Utilities was the
weakest performing sector, returning 7.73%.
The best performing stock in the S&P 500 over the past fiscal year was LSI
Logic, which posted an amazing return of 363.27%. Other strong performers have
been Sun Microsystems, Charles Schwab and Adobe Systems, posting gains of
301.26%, 297.22%, and 280.29%, respectively. The worst performing stocks include
Fruit of The Loom, Service Corporation International and McKesson HBOC, posting
losses of 68.80%, 58.16%, and 57.93%, respectively.
- --------------------------------------------------------
Top Ten Equity Holdings
(as a percent of Total Investments) August 31, 1999
- --------------------------------------------------------
Microsoft Corp. 4.3%
General Electric Co. 3.4
Intel Corp. 2.5
International Business Machines Corp. 2.1
Cisco System, Inc. 2.0
Wal-Mart Stores, Inc. 1.8
Lucent Technologies, Inc. 1.8
Exxon Corp. 1.8
Merck & Co., Inc. 1.4
Citigroup, Inc. 1.4
- --------------------------------------------------------
---------------------
Notes: The following notes relate to the Growth of $10,000 graph and table on
the preceding page.
* The Fund commenced operations on December 30, 1992. Index comparison began
December 31, 1992.
** The Standard & Poor's(R) 500 Composite Stock Index is composed of 500 common
stocks which are chosen by Standard & Poor's Corporation to best capture the
price performance of a large cross-section of the US publicly traded stock
market. The Index is structured to approximate the general distribution of
industries in the US economy.
+ Annualized.
"Standard & Poor's(R)", "S&P(R)", "S&P 500(R)", "Standard & Poor's 500" and
"500" are trademarks of Standard & Poor's Corporation and have been licensed for
use by The SSgA Fund. The Product is not sponsored, endorsed, sold or promoted
by Standard & Poor's, and Standard & Poor's makes no representation regarding
the advisability of investing in the Product.
Performance is historical and assumes reinvestment of all dividends and capital
gains. Investment return and principal value will fluctuate so that an
investor's shares, when redeemed, may be worth more or less than when purchased.
Past performance is not indicative of future results.
Annual Report 7
<PAGE>
Report of Independent Accountants
To the Shareholders and Board of Trustees
of the SSgA Funds:
In our opinion, the accompanying statement of assets and liabilities and
statement of net assets, and the related statements of operations and of changes
in net assets and the financial highlights present fairly, in all material
respects, the financial position of SSgA S&P 500 Index Fund (the "Fund") at
August 31, 1999, the results of its operations for the fiscal year then ended
and the changes in its net assets for each of the two fiscal years in the period
then ended, and the financial highlights for each of the five fiscal years in
the period then ended, in conformity with generally accepted accounting
principles. These financial statements and financial highlights (hereafter
referred to as "financial statements") are the responsibility of the Fund's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these financial
statements in accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of securities at August 31, 1999 by correspondence with the
custodian and brokers, provide a reasonable basis for the opinion expressed
above.
Boston, Massachusetts
October 11, 1999
/s/ PricewaterhouseCoopers LLP
8 Annual Report
<PAGE>
SSgA
S&P 500 Index Fund
Statement of Net Assets
August 31, 1999
Market
Number Value
of (000)
Shares $
--------- -----
Common Stocks - 99.1%
Basic Industries - 3.7%
Air Products & Chemicals, Inc. 54,700 1,860
Alcan Aluminum, Ltd. 54,900 1,804
Alcoa, Inc. 90,700 5,855
Allegheny Teldyne, Inc. 45,377 847
ASARCO, Inc. 6,700 139
Barrick Gold Corp. 95,300 1,846
Bemis Co., Inc. 13,000 493
Bethlehem Steel Corp. (a) 29,000 223
Boise Cascade Corp. 14,100 513
Champion International Corp. 22,500 1,238
Crown Cork & Seal Co., Inc. 29,700 789
Cyprus Amax Minerals Co. 20,300 344
Dow Chemical Co. 53,700 6,102
du Pont (E.I.) de Nemours & Co. 240,500 15,242
Eastman Chemical Co. 19,225 893
Engelhard Corp. 31,525 629
FMC Corp. (a) 8,000 466
Freeport-McMoRan Copper &
Gold, Inc. Class B 40,200 646
Goodrich (B.F.) Co. 28,300 1,045
Great Lakes Chemical Corp. 14,400 593
Hercules, Inc. 27,500 895
Homestake Mining Co. 63,200 537
Illinois Tool Works, Inc. 60,800 4,739
Inco, Ltd. 46,400 951
International Paper Co. 100,283 4,720
Kimberly-Clark Corp. 130,236 7,415
Mead Corp. 25,600 955
Minnesota Mining &
Manufacturing Co. 98,400 9,299
Monsanto Co. 155,000 6,365
Nalco Chemical Co. 16,100 827
Newmont Mining Corp. 38,767 792
Nucor Corp. 21,800 1,015
Owens-Illinois, Inc. (a) 39,400 975
Phelps Dodge Corp. 14,100 789
Placer Dome, Inc. 78,700 817
Potlatch Corp. 6,400 247
PPG Industries, Inc. 42,000 2,523
Praxair, Inc. 38,000 1,786
Reynolds Metals Co. 16,800 1,064
Rohm & Haas Co. 51,020 1,907
Sealed Air Corp. New (a) 20,243 1,189
Sigma Aldrich Corp. 23,300 749
Temple-Inland, Inc. 13,500 837
Union Carbide Corp. 31,700 1,803
USX-U.S. Steel Group 19,700 532
W.R. Grace & Co. New (a) 16,400 314
Westvaco Corp. 24,400 639
Willamette Industries, Inc. 27,600 1,094
Worthington Industries, Inc. 20,100 302
------
97,644
------
Capital Goods - 5.6%
Allied Waste Industries, Inc. (a) 46,700 596
Ball Corp. 7,200 324
Boston Scientific Corp. (a) 95,500 3,241
Briggs & Stratton Corp. 5,000 304
Case Corp. 17,800 879
Caterpillar, Inc. 87,500 4,955
Cooper Industries, Inc. 23,100 1,198
Crane Co. 17,800 428
Cummins Engine Co., Inc. 10,200 604
Deere & Co. 56,900 2,212
Dover Corp. 50,600 1,958
Emerson Electric Co. 106,500 6,670
Fluor Corp. 18,200 753
Foster Wheeler Corp. 6,800 88
General Electric Co. 800,500 89,906
Grainger (W.W.), Inc. 22,600 985
Ingersoll-Rand Co. 40,300 2,564
ITT Industries, Inc. 21,300 720
Johnson Controls, Inc. 20,500 1,402
Milacron, Inc. 9,300 167
Millipore Corp. 10,300 389
NACCO Industries, Inc. Class A 1,400 109
Annual Report 9
<PAGE>
SSgA
S&P 500 Index Fund
Statement of Net Assets, continued
August 31, 1999
Market
Number Value
of (000)
Shares $
--------- -----
National Service Industries, Inc. 10,000 320
Pall Corp. 30,000 596
Parker-Hannifin Corp. 27,850 1,218
Raytheon Co. Class B 81,900 5,579
Timken Co. 13,400 235
TRW, Inc. 29,800 1,624
Tyco International, Ltd. 201,324 20,397
-------
150,421
-------
Consumer Basics - 18.7%
Abbott Laboratories 372,100 16,139
Albertson's, Inc. 104,103 4,990
Allergan, Inc. 16,000 1,598
ALZA Corp. (a) 24,600 1,239
American Home Products Corp. 321,600 13,346
Amgen, Inc. (a) 125,000 10,391
Archer-Daniels-Midland Co. 149,285 1,941
Bard (C.R.), Inc. 12,400 578
Bausch & Lomb, Inc. 13,500 892
Baxter International, Inc. 71,300 4,782
Becton, Dickinson & Co. 61,400 1,727
Bestfoods 67,600 3,321
Biomet, Inc. 27,100 967
Black & Decker Corp. 21,000 1,105
Bristol-Myers Squibb Co. 484,900 34,125
Campbell Soup Co. 105,500 4,662
Cardinal Health, Inc. 66,112 4,215
Clorox Co. 57,600 2,606
Coca-Cola Co. (The) 602,500 36,037
Coca-Cola Enterprises, Inc. 102,600 2,918
Colgate-Palmolive Co. 143,000 7,651
Columbia/HCA Healthcare Corp. 137,932 3,397
ConAgra, Inc. 122,100 2,991
Corning, Inc. 59,000 3,924
Costco Wholesale Corp. 54,600 4,078
CVS Corp. 94,700 3,948
Fort James Corp. 53,100 1,712
General Mills, Inc. 37,000 3,099
Gillette Co. 270,400 12,607
Great Atlantic & Pacific Tea
Co., Inc. 8,300 292
HCR Manor Care, Inc. (a) 26,900 526
HEALTHSOUTH Corp. (a) 100,300 821
Heinz (H.J.) Co. 87,850 4,101
Hershey Foods Corp. 33,800 1,810
Humana, Inc. (a) 40,700 369
Johnson & Johnson 329,600 33,702
Kellogg Co. 101,200 3,599
Kroger Co. (a) 204,800 4,736
Lilly (Eli) & Co. 269,200 20,089
Mallinckrodt, Inc. 18,700 600
McKesson HBOC, Inc. 66,951 2,084
Medtronic, Inc. 142,700 11,166
Merck & Co., Inc. 576,400 38,727
Nabisco Group Holdings Corp. (a) 78,500 1,393
PE Corp. 24,200 1,665
PepsiCo, Inc. 363,000 12,387
Pfizer, Inc. 948,200 35,795
Pharmacia & Upjohn, Inc. 125,225 6,543
Philip Morris Cos., Inc. 590,000 22,088
Pioneer Hi-Bred International, Inc. 58,200 2,277
Procter & Gamble Co. 325,500 32,306
Quaker Oats Co. 32,800 2,191
Ralston-Purina Group 78,800 2,167
Safeway, Inc. (a) 121,300 5,648
Sara Lee Corp. 224,300 4,977
Schering-Plough Corp. 359,900 18,917
Snap-On Tools Corp. 15,900 538
St. Jude Medical, Inc. (a) 20,450 741
Stanley Works 21,600 570
SYSCO Corp. 80,000 2,610
Tenet Healthcare Corp. (a) 75,300 1,313
Tupperware Corp. 13,400 302
Unilever NV (a) 139,528 9,610
United Healthcare Corp. 42,500 2,585
UST Corp. 43,500 1,378
Warner-Lambert Co. 209,000 13,846
Watson Pharmaceuticals, Inc. (a) 22,300 800
10 Annual Report
<PAGE>
SSgA
S&P 500 Index Fund
Statement of Net Assets, continued
August 31, 1999
Market
Number Value
of (000)
Shares $
--------- -----
Wellpoint Health Networks, Inc. (a) 16,700 1,217
Winn-Dixie Stores, Inc. 35,900 1,221
Wrigley (Wm.), Jr. Co. 27,900 2,185
-------
500,878
-------
Consumer Durables - 1.8%
AutoZone, Inc. (a) 34,800 830
Best Buy Co. (a) 49,500 3,477
Cooper Tire & Rubber Co. 16,900 321
Dana Corp. 39,865 1,737
Danaher Corp. 34,300 2,015
Delphi Automotive Systems Corp. 138,041 2,588
Eaton Corp. 17,600 1,725
Fleetwood Enterprises, Inc. 6,700 137
Ford Motor Co. 297,300 15,497
General Motors Corp. 158,400 10,474
Genuine Parts Co. 43,750 1,263
Goodyear Tire & Rubber Co. 38,600 2,166
Maytag Corp. 21,800 1,365
PACCAR, Inc. 18,390 1,009
Tenneco, Inc. 41,000 825
Whirlpool Corp. 17,900 1,265
-------
46,694
-------
Consumer Non-Durables - 6.2%
Alberto Culver Co. Class B 12,300 313
Anheuser-Busch Cos., Inc. 116,400 8,963
Avon Products, Inc. 63,300 2,777
Brown-Forman Distillers, Inc.
Class B 15,900 934
Brunswick Corp. 20,400 521
Circuit City Stores, Inc. 48,600 2,090
Consolidated Stores Corp. (a) 26,642 430
Coors (Adolph) Co. Class B 10,100 576
Dayton Hudson Corp. 108,300 6,281
Dillard's, Inc. Class A 26,000 611
Dollar General Corp. 53,593 1,393
Eastman Kodak Co. 78,100 5,735
Federated Department
Stores, Inc. (a) 52,300 2,406
Fortune Brands, Inc. 41,500 1,556
Fruit of The Loom, Inc. Class A (a) 13,000 91
Gap, Inc. 210,375 8,231
Hasbro, Inc. 47,700 1,166
Home Depot, Inc. (The) 362,298 22,145
Ikon Office Solutions, Inc. 34,300 382
International Flavors &
Fragrances, Inc. 24,600 1,002
JC Penney & Co., Inc. 63,600 2,306
Jostens, Inc. 7,014 141
Kmart Corp. (a) 121,000 1,520
Kohl's Corp. (a) 39,800 2,836
Limited, Inc. (The) 51,568 1,953
Liz Claiborne, Inc. 15,700 577
Longs Drug Stores, Inc. 8,900 280
Lowe's Cos., Inc. 92,200 4,172
Mattel, Inc. 102,687 2,189
May Department Stores Co. 80,800 3,156
Newell Rubbermaid, Inc. 68,157 2,794
NIKE, Inc. Class B 68,600 3,173
Nordstrom, Inc. 33,300 943
Office Depot, Inc. (a) 92,900 970
Pep Boys - Manny, Moe & Jack 9,848 143
Polaroid Corp. 8,800 239
Reebok International, Ltd. (a) 12,600 149
Rite Aid Corp. 62,900 1,164
Russell Corp. 6,600 111
Seagram Co., Ltd. NPV 103,900 5,513
Sears Roebuck & Co. 92,000 3,450
Springs Industries, Inc. 3,500 131
Staples, Inc. (a) 113,550 2,463
SuperValu, Inc. 27,900 628
TJX Cos., Inc. 79,400 2,293
Toys "R" Us, Inc. (a) 58,400 807
V.F. Corp. 30,900 1,112
Annual Report 11
<PAGE>
SSgA
S&P 500 Index Fund
Statement of Net Assets, continued
August 31, 1999
Market
Number Value
of (000)
Shares $
--------- -------
Wal-Mart Stores, Inc. 1,089,400 48,274
Walgreen Co. 245,400 5,690
-------
166,780
-------
Consumer Services - 1.8%
AMR Corp. (a) 37,300 2,186
Carnival Corp. Class A NPV 149,900 6,698
Darden Restaurants, Inc. 31,000 483
Delta Air Lines, Inc. 33,900 1,723
Disney (Walt) Co. 505,686 14,033
Harrah's Entertainment, Inc. (a) 30,700 691
Hilton Hotels Corp. 63,400 777
King World Productions, Inc. (a) 16,000 610
Marriot International, Inc. Class 61,000 2,089
McDonald's Corp. 333,600 13,803
Mirage Resorts, Inc. (a) 49,800 651
Southwest Airlines Co. 123,487 2,061
Tricon Global Restaurants, Inc. (a) 36,710 1,491
USAirways Group, Inc. (a) 17,900 552
Wendy's International, Inc. 29,700 832
-------
48,680
-------
Energy - 6.5%
Amerada Hess Corp. 22,500 1,397
Anadarko Petroleum Corp. 29,300 996
Apache Corp. 26,400 1,201
Ashland, Inc. 18,000 694
Atlantic Richfield Co. 78,650 6,916
Baker Hughes, Inc. 79,180 2,692
Burlington Resources, Inc. 42,922 1,795
Chevron Corp. 160,900 14,843
Conoco, Inc. Class B NPV 156,000 4,193
Constellation Energy Group 38,500 1,141
Exxon Corp. 594,400 46,883
Halliburton Co. 106,800 4,953
Helmerich & Payne, Inc. 11,200 309
Kerr-McGee Corp. 22,156 1,241
McDermott International, Inc. 13,700 309
Mobil Corp. 191,300 19,584
Occidental Petroleum Corp. 82,500 1,789
ONEOK, Inc. 9,700 301
Phillips Petroleum Co. 61,100 3,116
Rowan Cos., Inc. (a) 20,200 376
Royal Dutch Petroleum Co. 523,700 32,404
Schlumberger, Ltd. 133,700 8,924
Sempra Energy 57,811 1,290
Sunoco, Inc. 21,655 705
Texaco, Inc. 131,100 8,325
Union Pacific Resources
Group, Inc. 63,718 1,143
Unocal Corp. 58,600 2,454
USX-Marathon Group 74,600 2,322
-------
172,296
-------
Finance - 14.7%
Aetna, Inc. 34,502 2,684
AFLAC, Inc. 64,900 2,916
Allstate Corp. 197,588 6,483
American Express Co. 110,600 15,208
American General Corp. 61,187 4,344
American International Group, Inc. 378,245 35,059
AmSouth Bancorp 41,850 915
AON Corp. 61,950 2,068
Associates First Capital Corp.
Class A 178,016 6,108
Bank of America Corp. 426,195 25,785
Bank of New York Co., Inc. 186,100 6,653
Bank One Corp. 289,968 11,635
BankBoston Corp. 72,500 3,367
BB&T Corp. 76,800 2,573
Bear Stearns Cos., Inc. 29,970 1,248
Capital One Financial Corp. 48,300 1,823
Chase Manhattan Corp. 206,928 17,317
Chubb Corp. (The) 43,800 2,505
CIGNA Corp. 50,500 4,536
Cincinnati Financial Corp. 41,100 1,629
Citigroup, Inc. 825,125 36,666
12 Annual Report
<PAGE>
SSgA
S&P 500 Index Fund
Statement of Net Assets, continued
August 31, 1999
Market
Number Value
of (000)
Shares $
-------- -----
Comerica, Inc. 39,450 2,054
Conseco, Inc. 77,845 1,868
Countrywide Credit Industries, 27,300 877
Dun & Bradstreet Corp. 38,700 1,013
Equifax, Inc. 34,900 1,064
Federal Home Loan Mortgage Corp. 169,700 8,740
Federal National Mortgage
Association 250,600 15,569
Fifth Third Bancorp 64,950 4,287
First Union Corp. 236,512 9,815
Firstar Corp. 164,200 4,403
Fleet Financial Group, Inc. 141,050 5,616
Franklin Resources, Inc. 61,800 2,221
Golden West Financial Corp. 13,800 1,253
Hartford Financial Services
Group, Inc. (The) 54,900 2,495
Household International Corp. 115,899 4,375
Huntington Bancshares, Inc. 55,816 1,668
Jefferson-Pilot Corp. 25,575 1,707
KeyCorp 109,598 3,178
Lehman Brothers Holdings, Inc. 29,000 1,559
Lincoln National Corp. 48,000 2,250
Loews Corp. 26,400 2,072
Marsh & McLennan Cos., Inc. 64,350 4,685
MBIA, Inc. 24,900 1,292
MBNA Corp. 198,382 4,898
Mellon Bank Corp. 126,900 4,235
Mercantile Bancorp, Inc. 38,200 2,108
Merrill Lynch & Co., Inc. 89,900 6,709
MGIC Investment Corp. 27,100 1,177
Morgan (J.P.) & Co., Inc. 43,900 5,671
Morgan Stanley Dean Witter & Co. 139,156 11,941
National City Corp. 156,100 4,312
Northern Trust Corp. 26,900 2,273
Paine Webber Group, Inc. 35,000 1,374
Paychex, Inc. 59,650 1,752
PNC Bank Corp. 73,500 3,845
Progressive Corp. 17,500 1,785
Providian Financial Corp. 34,800 2,701
Regions Financial Corp. 53,300 1,875
Republic of New York Corp. 25,900 1,797
SAFECO Corp. 33,100 1,173
Schwab (Charles) Corp. 199,400 7,876
SLM Holding Corp. 40,300 1,781
SouthTrust Corp. 40,100 1,414
St. Paul Cos., Inc. 54,672 1,753
State Street Corp. 38,600 2,311
Summit Bancorp 42,200 1,408
SunTrust Banks, Inc. 79,600 5,119
Synovus Financial Corp. 66,400 1,253
Torchmark Corp. 32,200 918
U.S. Bancorp 175,617 5,422
Union Planters Corp. 36,300 1,531
UnumProvident Corp. 57,828 2,085
Wachovia Corp. 48,800 3,825
Washington Mutual, Inc. 143,598 4,559
Wells Fargo Co. 404,159 16,091
-------
392,555
-------
General Business - 4.7%
American Greetings Corp. Class A 15,400 427
Automatic Data Processing, Inc. 151,800 5,968
Block (H&R) Co., Inc. 23,200 1,291
CBS Corp. (a) 174,100 8,183
Cendant Corp. (a) 177,836 3,190
Clear Channel
Communications, Inc. (a) 82,300 5,766
Comcast Corp. Special Class A 182,000 5,926
Computer Sciences Corp. (a) 38,600 2,671
Deluxe Corp. 19,500 664
Donnelley (R.R.) & Sons Co. 32,600 1,023
Dow Jones & Co., Inc. 21,900 1,100
Ecolab, Inc. 31,400 1,179
First Data Corp. 106,300 4,677
Gannett Co., Inc. 67,600 4,593
Harcourt General, Inc. 17,300 758
IMS Health, Inc. 76,600 2,116
Interpublic Group Cos., Inc. 68,600 2,718
Annual Report 13
<PAGE>
SSgA
S&P 500 Index Fund
Statement of Net Assets, continued
August 31, 1999
Market
Number Value
of (000)
Shares $
--------- -----
Knight-Ridder, Inc. 19,100 1,030
McGraw-Hill, Inc. 48,200 2,491
MediaOne Group, Inc. (a) 147,900 9,724
Meredith Corp. 13,200 458
New York Times Co. Class A 42,700 1,668
Omnicom Group, Inc. 43,300 3,264
SBC Communications, Inc. 479,782 23,030
Service Corp. International 65,800 909
Time Warner, Inc. 292,600 17,355
Times Mirror Co. Series A 17,800 1,028
Tribune Co. 28,700 2,678
Viacom, Inc. Class B (a) 169,022 7,109
Waste Management, Inc. 149,359 3,258
-------
126,252
-------
Shelter - 0.4%
Armstrong World Industries, Inc. 9,700 472
Centex Corp. 13,300 375
Georgia-Pacific Group 42,200 1,746
Kaufman & Broad Home Corp. 10,200 208
Louisiana Pacific Corp. 26,400 488
Masco Corp. 81,500 2,307
Owens Corning 14,300 402
Pulte Corp. 10,600 245
Sherwin-Williams Co. 41,800 1,019
Vulcan Materials Co. 24,500 1,044
Weyerhaeuser Co. 50,100 2,818
-------
11,124
-------
Technology - 25.0%
3Com Corp. (a) 87,525 2,167
ADC Telecommunications, Inc. (a) 33,500 1,241
Adobe Systems, Inc. 14,900 1,483
Advanced Micro Devices, Inc. (a) 35,200 728
AlliedSignal, Inc. 135,000 8,269
America Online, Inc. (a) 266,299 24,316
Andrew Corp. (a) 18,668 327
Apple Computer, Inc. (a) 38,300 2,497
Applied Materials, Inc. (a) 91,900 6,525
Autodesk, Inc. 13,700 315
Avery Dennison Corp. 27,500 1,509
BMC Software, Inc. (a) 57,000 3,064
Boeing Co. 237,876 10,779
Cabletron Systems, Inc. (a) 41,600 699
Ceridian Corp. (a) 35,300 988
Cisco Systems, Inc. (a) 782,000 52,981
COMPAQ Computer Corp. 415,029 9,623
Computer Associates
International, Inc. 129,862 7,337
Compuware Corp. (a) 88,900 2,678
Data General Corp. (a) 13,800 254
Dell Computer Corp. (a) 619,600 30,244
EG&G, Inc. 9,400 299
Electronic Data Systems Corp. 121,200 6,802
EMC Corp. (a) 248,600 14,916
Gateway, Inc. (a) 37,800 3,664
General Dynamics Corp. 48,200 3,037
General Instrument Corp. (a) 43,600 2,145
Guidant Corp. 73,800 4,331
Harris Corp. 19,200 504
Hewlett-Packard Co. 247,900 26,122
Honeywell, Inc. 31,400 3,564
Intel Corp. 812,000 66,736
International Business
Machines Corp. 444,200 55,331
KLA Tencor Corp. (a) 21,300 1,338
Lexmark International Group, Inc.
Class A (a) 31,600 2,489
Lockheed Martin Corp. 96,346 3,565
LSI Logic Corp. (a) 34,400 1,952
Lucent Technologies, Inc. 744,192 47,675
Micron Technology, Inc. (a) 60,900 4,541
Microsoft Corp. (a) 1,248,600 115,496
Motorola, Inc. 148,200 13,671
National Semiconductor Corp. (a) 40,600 1,144
Network Appliance, Inc. (a) 17,800 1,169
14 Annual Report
<PAGE>
SSgA
S&P 500 Index Fund
Statement of Net Assets, continued
August 31, 1999
Market
Number Value
of (000)
Shares $
--------- -----
Nextel Communications, Inc.
Class A (a) 71,600 4,135
Nortel Networks Corp. 326,060 13,389
Northrop Grumman Corp. 17,700 1,283
Novell, Inc. (a) 81,400 1,923
Oracle Systems Corp. (a) 353,705 12,888
Parametric Technology Corp. (a) 66,200 923
PeopleSoft, Inc. (a) 58,800 827
Pitney Bowes, Inc. 66,800 3,941
QUALCOMM, Inc. (a) 37,300 7,166
Rockwell International Corp. 45,700 2,702
Scientific-Atlanta, Inc. 18,400 943
Seagate Technology (a) 53,900 1,789
Shared Medical Systems 7,000 393
Silicon Graphics, Inc. (a) 49,900 571
Solectron Corp. (a) 65,600 5,133
Sun Microsystems, Inc. (a) 190,100 15,101
Tandy Corp. 47,600 2,249
Tektronix, Inc. 11,400 379
Tellabs, Inc. (a) 96,100 5,718
Texas Instruments, Inc. 192,600 15,805
Textron, Inc. 36,500 2,947
Thermo Electron Corp. (a) 35,700 567
Thomas & Betts Corp. 12,600 567
Unisys Corp. (a) 70,400 3,027
United Technologies Corp. 117,900 7,796
Xerox Corp. 161,700 7,721
-------
668,398
-------
Transportation - 0.6%
Burlington Northern, Inc. 114,007 3,306
CSX Corp. 52,600 2,298
FDX Corp. (a) 72,640 3,083
Kansas City Southern
Industries, Inc. 26,200 1,213
Laidlaw, Inc. 80,200 501
Navistar International Corp. (a) 16,050 780
Norfolk Southern Corp. 91,600 2,399
Ryder System, Inc. 16,900 373
Union Pacific Corp. 61,900 3,014
-------
16,967
-------
Utilities - 9.4%
AES Corp. (a) 46,100 2,797
Alltel Corp. 75,400 5,099
Ameren Corp. 34,077 1,365
American Electric Power Co., Inc. 46,800 1,699
Ameritech Corp. 268,800 16,968
AT&T Corp. 779,363 35,071
Bell Atlantic Corp. 379,564 23,248
BellSouth Corp. 463,100 20,955
Carolina Power & Light Co. 40,300 1,466
Central & Southwest Corp. 51,600 1,167
CenturyTel, Inc. 34,050 1,339
Cinergy Corp. 38,526 1,170
CMS Energy Corp. 28,400 1,124
Coastal Corp. 51,200 2,218
Columbia Energy Group 20,100 1,187
Consolidated Edison, Inc. 54,900 2,416
Consolidated Natural Gas Co. 23,300 1,484
Dominion Resources, Inc. 46,400 2,146
DTE Energy Co. 35,000 1,380
Duke Energy Corp. 88,974 5,116
Eastern Enterprises, Inc. 7,200 324
Edison International 84,000 2,132
Enron Corp. 172,800 7,236
Entergy Corp. 59,900 1,786
FirstEnergy Corp. 57,600 1,645
Florida Progress Corp. 24,000 1,125
FPL Group, Inc. 43,600 2,354
Frontier Corp. 42,200 1,770
GPU, Inc. 30,500 1,041
GTE Corp. 237,700 16,312
MCI WorldCom, Inc. (a) 454,289 34,384
New Century Energies, Inc. 27,800 1,004
Niagara Mohawk Holdings, Inc. (a) 44,400 672
NICOR, Inc. 11,900 460
Annual Report 15
<PAGE>
SSgA
S&P 500 Index Fund
Statement of Net Assets, continued
August 31, 1999
Market
Number Value
of (000)
Shares $
--------- -----
Northern States Power Co. 37,100 874
PacifiCorp. 72,200 1,476
Peco Energy Co. 45,600 1,853
Peoples Energy Corp. 7,700 281
PG&E Corp. 92,900 2,816
PP&L Resources, Inc. 36,900 1,033
Public Service Enterprise
Group, Inc. 53,100 2,177
Reliant Energy, Inc. NPV 72,410 2,005
Sonat, Inc. 26,700 965
Southern Co. 169,400 4,584
Sprint Corp. 211,100 9,368
Sprint Corp. (PCS Group) 108,700 6,495
Texas Utilities Co. 67,830 2,743
U.S. West, Inc. NPV 123,259 6,440
Unicom Corp. 53,800 2,078
Williams Cos. (The) 105,680 4,359
---------
251,207
---------
Total Common Stocks
(cost $1,971,512) 2,649,896
---------
Principal Market
Amount Value
(000) (000)
$ $
--------- -------
Short-Term Investments - 0.9%
AIM Short Term Investment
Prime Portfolio (b) 12,924 12,924
Federated Investors Prime Cash
Obligations Fund (b) 1,003 1,003
United States Treasury Bills
4.530% due 09/02/99 (b)(c)(d) 5,400 5,399
United States Treasury Bills
4.730% due 12/16/99 (c) 5,400 5,325
---------
Total Short-Term Investments
(cost $24,651) 24,651
---------
Total Investments - 100.0%
(identified cost $1,996,163) 2,674,547
Other Assets and Liabilities,
Net - 0.0% (584)
---------
Net Assets - 100.0% 2,673,963
=========
(a) Nonincome-producing security.
(b) At cost, which approximates market.
(c) Rate noted is yield-to-maturity (Unaudited).
(d) Held as collateral in connection with futures contracts purchased by the
Fund.
Abbreviations:
NPV - No Par Value
NV - Nonvoting
See the accompanying notes which are an integral part of the financial
statements.
16 Annual Report
<PAGE>
SSgA
S&P 500 Index Fund
Statement of Net Assets, continued
August 31, 1999
Unrealized
Number Appreciation
of (Depreciation)
Contracts (000)
--------- -------------
Futures Contracts
S&P 500 Financial Futures Contracts
expiration date 09/99 88 $ (750)
-------
Total Unrealized Appreciation
(Depreciation) on Open Futures
Contracts Purchased $ (750)
=======
See the accompanying notes which are an integral part of the financial
statements.
Annual Report 17
<PAGE>
SSgA
S&P 500 Index Fund
Statement of Asset and Liabilities
Amounts in thousands (except per share amount) August 31, 1999
<TABLE>
<S> <C> <C>
Assets
Investments at market (identified cost $1,996,163) .......................... $ 2,674,547
Receivables:
Dividends ................................................................ 3,700
Investments sold ......................................................... 113
Fund shares sold ......................................................... 2,597
Short-term investments held as collateral for securities loaned,
at market................................................................. 70,874
-----------
Total Assets .......................................................... 2,751,831
Liabilities
Payables:
Fund shares redeemed ........................................... $ 6,083
Accrued fees to affiliates ..................................... 538
Other accrued expenses ......................................... 229
Daily variation margin on futures contracts .................... 144
Payable upon return of securities loaned, at market ............... 70,874
--------
Total Liabilities ..................................................... 77,868
-----------
Net Assets .................................................................. $ 2,673,963
===========
Net Assets Consist of:
Undistributed net investment income ......................................... $ 8,644
Accumulated net realized gain (loss) ........................................ 80,736
Unrealized appreciation (depreciation) on:
Investments .............................................................. 678,384
Futures contracts ........................................................ (750)
Shares of beneficial interest ............................................... 113
Additional paid-in capital .................................................. 1,906,836
-----------
Net Assets .................................................................. $ 2,673,963
===========
Net Asset Value, offering and redemption price per share:
($2,673,962,754 divided by 112,629,289 shares of $.001 par value
shares of beneficial interest outstanding) ............................ $ 23.74
===========
</TABLE>
See the accompanying notes which are an integral part of the financial
statements.
18 Annual Report
<PAGE>
SSgA
S&P 500 Index Fund
Statement of Operations
Amounts in thousands For the Fiscal Year Ended August 31, 1999
<TABLE>
<S> <C> <C>
Investment Income
Dividends (net of foreign taxes withheld of $378) ......................... $ 34,573
Interest .................................................................. 377
---------
Total Investment Income ................................................ 34,950
Expenses
Advisory fees ................................................. $ 2,372
Administrative fees ........................................... 739
Custodian fees ................................................ 439
Distribution fees ............................................. 910
Transfer agent fees ........................................... 300
Professional fees ............................................. 34
Registration fees ............................................. 453
Shareholder servicing fees .................................... 1,253
Trustees' fees ................................................ 47
Miscellaneous ................................................. 116
-------
Expenses before reductions .................................... 6,663
Expense reductions ............................................ (2,357)
-------
Expenses, net .......................................................... 4,306
---------
Net investment income ........................................................ 30,644
---------
Net Realized and Unrealized Gain (Loss)
Net realized gain (loss) on:
Investments ................................................... 153,965
Futures contracts ............................................. 11,345 165,310
-------
Net change in unrealized appreciation (depreciation) on:
Investments ................................................... 477,215
Futures contracts ............................................. 3,553 480,768
------- ---------
Net realized and unrealized gain (loss) ...................................... 646,078
---------
Net increase (decrease) in net assets resulting from operations .............. $ 676,722
=========
</TABLE>
See the accompanying notes which are an integral part of the financial
statements.
Annual Report 19
<PAGE>
SSgA
S&P 500 Index Fund
Statement of Changes in Net Assets
Amounts in thousands For the Fiscal Years Ended August 31,
<TABLE>
<CAPTION>
1999 1998
----------- -----------
<S> <C> <C>
Increase (Decrease) in Net Assets
Operations
Net investment income ................................................ $ 30,644 $ 23,375
Net realized gain (loss) ............................................. 165,310 201,226
Net change in unrealized appreciation (depreciation) ................. 480,768 (163,674)
----------- -----------
Net increase (decrease) in net assets resulting from operations.... 676,722 60,927
----------- -----------
Distributions
From net investment income ........................................... (28,913) (23,141)
From net realized gain on investments ................................ (211,531) (51,231)
----------- -----------
Net decrease from distributions ................................... (240,444) (74,372)
----------- -----------
Share Transactions
Net increase (decrease) in net assets from share transactions ........ 621,772 329,787
----------- -----------
Total Net Increase (Decrease) in Net Assets ............................. 1,058,050 316,342
Net Assets
Beginning of period .................................................. 1,615,913 1,299,571
----------- -----------
End of period (including undistributed net investment income of
$8,644 and $5,891, respectively) ................................... $ 2,673,963 $ 1,615,913
=========== ===========
</TABLE>
See the accompanying notes which are an integral part of the financial
statements.
20 Annual Report
<PAGE>
SSgA
S&P 500 Index Fund
Financial Highlights
The following table includes selected data for a share outstanding throughout
each period and other performance information derived from the financial
statements.
<TABLE>
<CAPTION>
Fiscal Years Ended August 31,
----------------------------------------------------------
1999 1998 1997 1996 1995
---------- ---------- ---------- -------- --------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period ........ $ 19.42 $ 18.96 $ 14.41 $ 12.81 $ 10.89
---------- ---------- ---------- -------- --------
Income From Operations
Net investment income (a) ................ .29 .31 .32 .32 .29
Net realized and unrealized gain (loss) .. 6.74 1.18 5.22 1.98 1.95
---------- ---------- ---------- -------- --------
Total Income From Operations ........... 7.03 1.49 5.54 2.30 2.24
---------- ---------- ---------- -------- --------
Distributions
From net investment income ............... (.29) (.32) (.32) (.31) (.29)
From net realized gain on investments .... (2.42) (.71) (.67) (.39) (.03)
---------- ---------- ---------- -------- --------
Total Distributions .................... (2.71) (1.03) (.99) (.70) (.32)
---------- ---------- ---------- -------- --------
Net Asset Value, End of Period .............. $ 23.74 $ 19.42 $ 18.96 $ 14.41 $ 12.81
========== ========== ========== ======== ========
Total Return (%) ............................ 39.52 7.91 40.30 18.46 21.11
Ratios/Supplemental Data:
Net Assets, end of period ($ in thousands) 2,673,963 1,615,913 1,299,571 704,683 545,200
Ratios to average net assets (%):
Operating expenses, net (b) ............ .18 .17 .16 .18 .19
Operating expenses, gross (b) .......... .28 .27 .26 .28 .29
Net investment income .................. 1.29 1.50 2.00 2.32 2.76
Portfolio turnover rate (%) .............. 13.80 26.17 7.54 28.72 38.56
</TABLE>
(a) For the period subsequent to August 31, 1998, average month-end shares
outstanding were used for this calculation.
(b) See Note 4 for current period amounts.
Annual Report 21
<PAGE>
SSgA
S&P 500 Index Fund
Notes to Financial Statements
August 31, 1999
1. Organization
The SSgA Funds (the "Investment Company") is a series mutual fund,
currently comprised of 23 investment portfolios which are in operation as
of August 31, 1999. These financial statements report on one portfolio,
the SSgA S&P 500 Index Fund (the "Fund"). The Investment Company is a
registered and diversified open-end investment company, as defined in the
Investment Company Act of 1940, as amended (the "1940 Act"), that was
organized as a Massachusetts business trust on October 3, 1987 and
operates under a First Amended and Restated Master Trust Agreement, dated
October 13, 1993, as amended (the "Agreement"). The Investment Company's
Agreement permits the Board of Trustees to issue an unlimited number of
full and fractional shares of beneficial interest at a $.001 par value.
2. Significant Accounting Policies
The Fund's financial statements are prepared in accordance with generally
accepted accounting principles which require the use of management
estimates. The following is a summary of the significant accounting
policies consistently followed by the Fund in the preparation of its
financial statements.
Security valuation: United States equity securities listed and traded
principally on any national securities exchange are valued on the basis of
the last sale price or, lacking any sale, at the closing bid price, on the
primary exchange on which the security is traded. United States
over-the-counter equities, fixed-income securities and options are valued
on the basis of the closing bid price. Futures contracts are valued on the
basis of the last sale price.
International securities traded on a national securities exchange are
valued on the basis of the last sale price. International securities
traded over the counter are valued on the basis of the mean of bid prices.
In the absence of a last sale or mean bid price, respectively, such
securities may be valued on the basis of prices provided by a pricing
service if those prices are believed to reflect the market value of such
securities.
Money market instruments maturing within 60 days of the valuation date are
valued at amortized cost, a method by which each portfolio instrument is
initially valued at cost, and thereafter a constant accretion/amortization
to maturity of any discount or premium is assumed, unless the Board of
Trustees determines that amortized cost does not represent fair value.
The Fund may value securities for which market quotations are not readily
available at "fair value," as determined in good faith pursuant to
procedures established by the Board of Trustees.
Securities transactions: Securities transactions are recorded on a trade
date basis. Realized gains and losses from securities transactions are
recorded on the basis of identified cost.
Investment income: Dividend income is recorded on the ex-dividend date and
interest income is recorded daily on the accrual basis.
22 Annual Report
<PAGE>
SSgA
S&P 500 Index Fund
Notes to Financial Statements, continued
August 31, 1999
Amortization and accretion: All zero-coupon bond discounts and original
issue discounts are accreted for both tax and financial reporting
purposes. All short- and long-term market premiums/discounts are
amortized/accreted for both tax and financial reporting purposes.
Federal income taxes: Since the Investment Company is a Massachusetts
business trust, each fund is a separate corporate taxpayer and determines
its net investment income and capital gains (or losses) and the amounts to
be distributed to each fund's shareholders without regard to the income
and capital gains (or losses) of the other funds.
It is the Fund's intention to qualify as a regulated investment company,
as defined by the Internal Revenue Code of 1986, as amended. This requires
the Fund to distribute all of its taxable income. Therefore, the Fund paid
no federal taxes and no federal income tax provision was required.
The Fund's aggregate cost of investments and the composition of unrealized
appreciation and depreciation of investment securities for federal income
tax purposes as of August 31, 1999 are as follows:
Net
Unrealized
Federal Tax Unrealized Unrealized Appreciation
Cost Appreciation (Depreciation) (Depreciation)
-------------- ------------- -------------- --------------
$1,999,335,599 $742,552,739 $(67,341,725) $675,211,014
Dividends and distributions to shareholders: Income dividends and capital
gain distributions, if any, are recorded on the ex-dividend date.
Dividends are generally declared and paid quarterly. Capital gain
distributions are generally declared and paid annually. An additional
distribution may be paid by the Fund to avoid imposition of federal income
tax on any remaining undistributed net investment income and capital
gains.
The timing and characterization of certain income and capital gain
distributions are determined in accordance with federal tax regulations
which may differ from generally accepted accounting principles ("GAAP").
As a result, net investment income and net realized gain (or loss) from
investment transactions for a reporting period may differ significantly
from distributions during such period. The differences between tax
regulations and GAAP relate primarily to investments in options, futures
and certain securities sold at a loss. Accordingly, the Fund may
periodically make reclassifications among certain of its capital accounts
without impacting its net asset value.
Expenses: Most expenses can be directly attributed to the individual Fund.
Expenses which cannot be directly attributed are allocated among all funds
based principally on their relative net assets.
Derivatives: To the extent permitted by the investment objectives,
restrictions and policies set forth in the Fund's Prospectus and Statement
of Additional Information, the Fund may participate in various
derivative-based transactions. Derivative securities are instruments or
agreements whose value is derived from an underlying security or index.
These instruments offer unique characteristics and risks that assist the
Fund to meet its investment objective.
The Fund typically uses derivatives for cash equitization. Cash
equitization is a technique that is used by the Fund through the use of
options and futures to earn "market-like" returns with the Fund's excess
and liquidity reserve
Annual Report 23
<PAGE>
SSgA
S&P 500 Index Fund
Notes to Financial Statements, continued
August 31, 1999
cash balances. By purchasing certain instruments, a fund may more
effectively achieve the desired portfolio characteristics that allow the
Fund to meet its investment objective. The Fund uses futures and options
contracts solely for the purpose of cash management. The primary risks
associated with the use of derivatives are generally categorized as market
risk.
Futures: The Fund is currently utilizing exchange-traded futures
contracts. The primary risks associated with the use of futures contracts
are an imperfect correlation between the change in market value of the
securities held by the Fund and the prices of futures contracts and the
possibility of an illiquid market. Changes in initial settlement value are
accounted for as unrealized appreciation (depreciation) until the
contracts are terminated, at which time realized gains and losses are
recognized.
3. Securities Transactions
Investment transactions: For the year ended August 31, 1999, purchases and
sales of investment securities, excluding short-term investments, futures
contracts and repurchase agreements, aggregated to $746,363,584, and
$316,061,622, respectively. In-kind redemption resulted in a gain of
$71,624,911.
Futures transactions: The Fund's transactions in futures contracts for the
year ended August 31, 1999 were as follows:
Futures Contracts
---------------------------
Aggregate
Number Face Value of
Contracts Contracts (1)
--------- -------------
Outstanding at August 31, 1998 125 $ 34,115,968
Contracts opened 1,718 514,901,565
Contracts closed (1,755) (519,231,492)
------ ------------
Outstanding at August 31, 1999 88 $ 29,786,041
====== ============
(1) The aggregate face value of contracts is computed on the date each
contract was opened.
Securities Lending: Effective December 17, 1998, the Investment Company
started its securities lending program. The program allows each Fund to
loan securities with a value up to 33 1/3% of its total assets to certain
brokers. The Fund receives cash (U.S. currency), U.S. Government or U.S.
Government agency obligations as collateral against the loaned securities.
To the extent that a loan is secured by cash collateral, such collateral
shall be invested by State Street Bank and Trust Company in short-term
instruments, money market mutual funds, and such other short-term
investments, provided the investments meet certain quality and
diversification requirements. Under the securities lending arrangement,
the collateral received is recorded on the Fund's statement of assets and
liabilities along with the related obligation to return the collateral. In
those situations where the Company has relinquished control of securities
transferred, it derecognizes the securities and records a receivable from
the counterparty.
Income generated from the investment of cash collateral, less negotiated
rebate fees paid to participating brokers and transaction costs, is
divided between the Fund and State Street Bank and Trust Company and is
recorded as interest income for the Fund. To the extent that a loan is
secured by non-cash collateral, brokers pay the Fund
24 Annual Report
<PAGE>
SSgA
S&P 500 Index Fund
Notes to Financial Statements, continued
August 31, 1999
negotiated lenders' fees, which are divided between the Fund and State
Street Bank and Trust Company and are recorded as interest income for the
Fund. All collateral received will be in an amount at least equal to 102%
(for loans of U.S. securities) or 105% (for non-U.S. securities) of the
market value of the loaned securities at the inception of each loan.
Should the borrower of the securities fail financially, there is a risk of
delay in recovery of the securities or loss of rights in the collateral.
Consequently, loans are made only to borrowers which are deemed to be of
good financial standing. As of August 31, 1999, the value of outstanding
securities on loan and the value of collateral amounted to $68,717,183 and
$70,874,363, respectively. The Fund recorded securities lending income of
$171,510 during the year.
4. Related Parties
Adviser: The Investment Company has an investment advisory agreement with
State Street Bank and Trust Company under which the Adviser directs the
investments of the Fund in accordance with its investment objectives,
policies, and limitations. For these services, the Fund pays a fee to the
Adviser, calculated daily and paid monthly, at the annual rate of .10% of
its average daily net assets. For the period September 1, 1998 to December
31, 1998, the Adviser voluntarily agreed to waive up to the full amount of
its advisory fee to the extent that total expenses exceed .15% of its
average daily net assets on an annual basis. Beginning January 1, 1999,
the Adviser voluntarily agreed to waive up to the full amount of its
advisory fee to the extent that total expenses exceed .18% of its average
daily net assets on an annual basis. The Investment Company also has
contracts with the Adviser to provide custody, shareholder servicing and
transfer agent services to the Fund. These amounts are presented on the
accompanying Statement of Operations.
In addition, the Fund has entered into arrangements with its Adviser
whereby credits realized as a result of uninvested cash balances were used
to reduce a portion of the Fund's expenses. During the period, the Fund's
custodian fees were reduced by $9,190 under these arrangements.
Administrator: The Investment Company has an administration agreement with
Frank Russell Investment Management Company (the "Administrator"), a
wholly owned subsidiary of The Northwestern Mutual Life Insurance Company,
under which the Administrator supervises all non-portfolio investment
aspects of the Investment Company's operations and provides adequate
office space and all necessary office equipment and services, including
telephone service, utilities, stationery supplies, and similar items. The
Investment Company pays the Administrator the following fees for services
supplied by the Administrator pursuant to the Administration Agreement:
(i) an annual fee, payable monthly on a pro rata basis, based on the
following percentages of the average daily net assets of all domestic
funds: $0 up to and including $500 million - .06%; over $500 million to
and including $1 billion - .05%; over $1 billion - .03%, and (ii) less an
amount equal to the sum of certain distribution-related expenses incurred
by the Investment Company's Distributor on behalf of the Fund (up to a
maximum of 10%, for the period September 1, 1997 to December 31, 1997, up
to a maximum of 5%, for the period January 1, 1998 to December 31, 1998
and 0% thereafter, of the asset-based fee determined in (i)). In addition,
the Fund reimburses the Administrator for out-of-pocket expenses and
start-up costs for new funds.
Distributor and Shareholder Servicing: The Investment Company has a
Distribution Agreement with Russell Fund Distributors (the "Distributor")
which is a wholly-owned subsidiary of the Administrator to promote and
offer shares of the Investment Company. The Distributor may enter into
sub-distribution agreements with other
Annual Report 25
<PAGE>
SSgA
S&P 500 Index Fund
Notes to Financial Statements, continued
August 31, 1999
non-related parties. The amounts paid to the Distributor are included in
the accompanying Statement of Operations.
The Investment Company has a Distribution Plan pursuant to Rule 12b-1 (the
"Plan") under the 1940 Act. Under this Plan, the Investment Company is
authorized to make payments to the Distributor, or any Shareholder
Servicing Agent, as defined in the Plan, for providing distribution and
marketing services, for furnishing assistance to investors on an ongoing
basis, and for the reimbursement of direct out-of-pocket expenses charged
by the Distributor in connection with the distribution and marketing of
shares of the Investment Company and the servicing of investor accounts.
The Fund has service agreements with the Adviser, the Adviser's Retirement
Investment Services Division ("RIS"), the Adviser's Metropolitan Division
of Commercial Banking ("Commercial Banking") and State Street Solutions
("Solutions")(collectively the "Agents"), as well as several unaffiliated
service providers. For these services, the Fund pays .025%, .050%, .050%
and .100% to the Adviser, RIS, Commercial Banking, and Solutions,
respectively based upon the average daily value of all Fund shares held by
or for customers of these Agents. For the year ended August 31, 1999, the
Fund was charged shareholder servicing expenses of $588,667, and $94,589,
$869 , and $133,400, by the Adviser, RIS, Commercial Banking and
Solutions, respectively.
The combined distribution and shareholder servicing payments shall not
exceed .25% of the average daily value of net assets on an annual basis.
The shareholder servicing payments shall not exceed .20% of the average
daily value of net assets on an annual basis. Any payments that exceed the
maximum amount of allowable reimbursement may be carried forward for two
years following the year in which the expenditure was incurred so long as
the plan is in effect. The Fund's responsibility for any such expenses
carried forward shall terminate at the end of two years following the year
in which the expenditure was incurred. The Trustees or a majority of the
Fund's shareholders have the right, however, to terminate the Distribution
Plan and all payments thereunder at any time. The Fund will not be
obligated to reimburse the Distributor for carryover expenses subsequent
to the Distribution Plan's termination or noncontinuance. There were no
carryover expenses as of August 31, 1999.
Affiliated Brokerage: The Fund placed a portion of its portfolio
transactions with State Street Brokerage Services, Inc. ("SSBSI"), an
affiliated broker dealer of the Fund's Adviser. The commissions paid to
SSBSI were $200,264 for the year ended August 31, 1999.
Board of Trustees: Through May 31, 1999, the Investment Company paid each
Trustee not affiliated with the Investment Company a retainer of $48,000
annually, $1,500 for each board meeting attended, an additional $1,500 for
attending the annual audit committee meeting, and reimbursement for
out-of-pocket expenses. As of June 1, 1999, each Trustee receives $2,500
for each board meeting attended, an additional $2,500 for attending the
annual audit committee meeting and $2,500 for the valuation committee fee
in addition to the $48,000 annual retainer. These expenses are allocated
among all of the Funds based upon their relative net assets.
26 Annual Report
<PAGE>
SSgA
S&P 500 Index Fund
Notes to Financial Statements, continued
August 31, 1999
Accrued fees payable to affiliates and trustees as of August 31, 1999 were
as follows:
Advisory fees $ 14,070
Administration fees 72,538
Custodian fees 36,557
Distribution fees 10,609
Shareholder servicing fees 353,812
Transfer agent fees 49,945
Trustees' fees 598
--------
$538,129
========
Beneficial Interest: As of August 31, 1999, one shareholder was a record
owner of approximately 11% of the total outstanding shares of the Fund.
5. Fund Share Transactions (amounts in thousands)
<TABLE>
<CAPTION>
Fiscal Years Ended August 31,
-----------------------------------------------------------
1999 1998
--------------------------- ---------------------------
Shares Dollars Shares Dollars
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Proceeds from shares sold 66,940 $ 1,498,677 60,545 $ 1,239,668
Proceeds from reinvestment of distributions 11,888 232,051 3,678 71,888
Payments for shares redeemed (49,413) (1,108,956) (49,549) (981,769)
----------- ----------- ----------- -----------
Total net increase (decrease) 29,415 $ 621,772 14,674 $ 329,787
=========== =========== =========== ===========
</TABLE>
6. Line of Credit
The Fund and several affiliated Funds (the "Participants") share in a $50
million revolving credit facility for temporary or emergency purposes,
including the meeting of redemption requests that otherwise might require
the untimely disposition of securities. The Participants are charged an
annual commitment fee of .09% (.065% prior to July 15, 1999) on the
average daily unused amount of the aggregate commitment, which is
allocated among each of the Participants. Interest, at the Federal Fund
Rate plus .50% annually, is calculated based on the market rates at the
time of the borrowing. The Fund may borrow up to a maximum of 33 1/3
percent of the value of its net assets under the agreement. The Fund did
not have any drawdowns during the year.
7. Dividends
On September 1, 1999, the Board of Trustees declared a dividend of $.0683
from net investment income, payable on September 7, 1999 to shareholders
of record on September 2, 1999.
Annual Report 27
<PAGE>
SSgA
S&P 500 Index Fund
Tax Information
August 31, 1999 (Unaudited)
The Fund paid distributions of $207,179,368 from net long-term capital
gains during its taxable year ended August 31, 1999.
Please consult a tax advisor for questions about federal or state income
tax laws.
28 Annual Report
<PAGE>
S&P 500 Index Fund
One International Place, 27th Floor
Boston, Massachusetts 02110
(800) 997-7327
- --------------------------------------------------------------------------------
Trustees
Lynn L. Anderson, Chairman
William L. Marshall
Steven J. Mastrovich
Patrick J. Riley
Richard D. Shirk
Bruce D. Taber
Henry W. Todd
Officers
Lynn L. Anderson, President, Treasurer and CEO
Mark E. Swanson, Assistant Secretary, Assistant
Treasurer and Principal Accounting Officer
J. David Griswold, Vice President and Secretary
Deedra S. Walkey, Assistant Secretary
Rick J. Chase, Assistant Secretary
Carla L. Anderson, Assistant Secretary
Investment Adviser
State Street Bank and Trust Company
225 Franklin Street
Boston, Massachusetts 02110
Custodian, Transfer Agent and
Office of Shareholder Inquiries
State Street Bank and Trust Company
1776 Heritage Drive
North Quincy, Massachusetts 02171
(800) 647-7327
Distributor
Russell Fund Distributors, Inc.
One International Place, 27th Floor
Boston, Massachusetts 02110
(800) 997-7327
Administrator
Frank Russell Investment Management Company
909 A Street
Tacoma, Washington 98402
Legal Counsel
Goodwin, Procter & Hoar LLP
Exchange Place
Boston, Massachusetts 02109
Independent Accountants
PricewaterhouseCoopers LLP
160 Federal Street
Boston, Massachusetts 02110
Annual Report 29
<PAGE>
SSgA(R) Funds
Active International Fund
Annual Report
August 31, 1999
Table of Contents
Page
Chairman's Letter............................................. 4
Portfolio Management Discussion and Analysis.................. 6
Report of Independent Accountants............................. 8
Financial Statements.......................................... 9
Financial Highlights.......................................... 23
Notes to Financial Statements................................. 24
Tax Information............................................... 31
Fund Management and Service Providers......................... 32
"SSgA(R)" is a registered trademark of State Street Corporation and is licensed
for use by the SSgA Funds.
This report is prepared from the books and records of the Fund and it is
submitted for the general information of shareholders. This information is for
distribution to prospective investors only when preceded or accompanied by a
SSgA Funds Prospectus containing more complete information concerning the
investment objective and operations of the Fund, charges and expenses. The
Prospectus should be read carefully before an investment is made.
Performance is historical and assumes reinvestment of all dividends and capital
gains. Investment return and principal value will fluctuate so that an
investor's shares, when redeemed, may be worth more or less than when purchased.
Past performance is not indicative of future results. International markets
entail different risks than those typically associated with domestic markets,
including currency fluctuations, political and economic instability, accounting
changes and foreign taxation. Securities may be less liquid and more volatile.
Please see the Prospectus for further details. Russell Fund Distributors, Inc.,
is the distributor of the SSgA Funds.
<PAGE>
SSgA Active International Fund
- --------------------------------------------------------------------------------
Letter From the Chairman of State Street Global Advisors
- --------------------------------------------------------------------------------
Dear Shareholders,
It is my pleasure to provide you with the SSgA Funds annual report for the
fiscal year ended August 31, 1999. The SSgA Fund family has grown to include
twenty-three portfolios covering a broad range of investment strategies. The
enclosed information provides an overview of the investment process for the SSgA
Active International Fund. This overview contains market updates, performance,
and financial information for the Fund. I hope you will find this information a
useful reference as you review your investment strategy.
During the past fiscal year, the SSgA Fund family has opened two new Funds. The
names and investment objectives for these funds are as follows:
The SSgA Aggressive Equity Fund seeks to maximize total return through investing
in US equity securities that are undervalued relative to their growth potential
as measured by SSgA's proprietary models.
The SSgA IAM Shares Fund seeks to maximize total return by investing primarily
in equity securities of companies that have entered into collective bargaining
agreements with the International Association of Machinists and Aerospace
Workers or affiliated labor unions.
Additionally, three SSgA Funds achieved a five-year track record during the 1999
fiscal year. These funds include the two institutional money market funds, SSgA
US Treasury and SSgA Prime Money Market Funds and the SSgA Emerging Markets
Fund. We are proud of our long-term record and look forward to having additional
funds complete their five-year anniversary.
In today's complex global marketplace, we are continually researching new
products and ideas to introduce to our fund family. Here at SSgA, we are
committed to providing a wide range of competitive investment vehicles to
fulfill your investment needs.
I would like to thank you for choosing the SSgA Funds.
Sincerely,
/s/ Nicholas A. Lopardo
Nicholas A. Lopardo
State Street Global Advisors
Chairman and Chief Executive Officer
4 Annual Report
<PAGE>
SSgA Active International Fund
- --------------------------------------------------------------------------------
Management of the Funds
- --------------------------------------------------------------------------------
[PHOTO]
Nicholas A. Lopardo
Chairman and Chief Executive Officer
A Team Approach to Investment Management
Our investment strategies are the product of the combined experience of our
professional staff. Portfolio Managers work together to develop and enhance the
techniques that drive our investment processes. As a result, the portfolios we
manage benefit from the knowledge of the entire team.
Mr. Robert Rubano, Principal, has been the portfolio manager primarily
responsible for investment decisions regarding the SSgA Active International
Fund since its inception in March 1995. Mr. Rubano has been with State Street
since 1990 as a portfolio manager of active international funds. He is a
graduate of Boston University's MBA program with concentration in Finance and
also holds an BA in Government and Mathematics from Bowdoin College. There are
seven other portfolio managers working with Mr. Rubano.
Annual Report 5
<PAGE>
SSgA Active International Fund
- --------------------------------------------------------------------------------
Portfolio Management Discussion and Analysis
- --------------------------------------------------------------------------------
Objective: Provide long-term capital growth.
Invests in: Equity securities of foreign issuers.
Strategy: Fund Managers will concentrate investments in holdings that are
composed of, but not limited to, countries included in the Morgan Stanley
International Europe, Australia, Far East ("MSCI EAFE") Index. Through the use
of our proprietary model, a quantitative selection process is used to select the
best securities within each underlying country in the Index.
- --------------------------------------------------------------------------------
GROWTH OF A $10,000 INVESTMENT
Dates Active International Fund MSCI EAFE Index **
Inception* $10,000 $10,000
1995 $10,890 $10,933
1996 $11,567 $11,794
1997 $11,703 $12,862
1998 $10,591 $12,844
1999 $13,438 $16,141
================================================================================
Performance Review
For the fiscal year ended August 31, 1999, the SSgA Active International Fund
gained 26.88%, modestly outpacing the MSCI EAFE Index, which rose 25.67%. The
Fund's performance is net of operating expenses, whereas Index results do not
include expenses of any kind. These positive results helped place the Fund in
the top third of the Lipper International Fund rankings. The Fund outperformed
EAFE due to its overweight in Asia, particularly Japan (3% at August 31, 1999),
Korea (1%) and Singapore (1%), as well as its stock selection within Japan.
Market and Portfolio Highlights
Global markets have come a long way since August 1998, when Russia defaulted on
its debt and the Malaysian government imposed capital controls. Several factors
are responsible for this resurgence, including the perception that
- --------------------------------------------------------------------------------
SSgA Active International Fund
- --------------------------------------------------------------------------------
Period Ended Growth of Total
08/31/99 $10,000 Return
- -------------- ------------ -------
1 Year $ 12,688 26.88%
Inception $ 13,438 6.82%+
- --------------------------------------------------------------------------------
Morgan Stanley Capital International
Europe, Australia, Far East Index (Net Dividend)
- --------------------------------------------------------------------------------
Period Ended Growth of Total
08/31/99 $10,000 Return
- -------------- ------------ -------
1 Year $ 12,567 25.67%
Inception $ 16,141 11.23%+
See related Notes on following page.
6 Annual Report
<PAGE>
SSgA Active International Fund
- --------------------------------------------------------------------------------
Portfolio Management Discussion and Analysis
- --------------------------------------------------------------------------------
the world would avoid a synchronized global recession. This was especially
beneficial from an investor perspective, as it provided a psychological boost
within the markets, evidenced by greater than anticipated economic growth in the
United States, large monetary and fiscal stimulus, and restructuring activity in
Japan. In addition, many measures were taken to sustain global growth, among
them more than 100 central bank easings through the first quarter of this year.
The restructuring which has occurred to date within the Asian economies, albeit
at a highly uneven pace, also played a major role in this turnaround. There has
been a furious pace of mergers and acquisitions, as companies seek to
rationalize capacity and effectuate cost savings. As one may expect, the only
way this region could pull out of trouble was to witness Japan's recovery from
its worst recession since World War II. In addition to a surprise rate cut and
increase in output earlier this year, several microeconomic reforms have taken
place in Japan to help jump start the economy. Within the Japanese banking
sector, the major banks were strengthened and the insolvent ones allowed to go
under. Non-performing loans were disposed of and improved disclosure and
supervisory measures were taken. The Fund was neutral to slightly underweight in
the Banking sector, but maintained an overweight exposure to several of the
largest bank issues. While sustaining a growth path remains a difficult
challenge in Japan, the market's 63% rise in the last year is evidence that the
correct steps are finally being taken. In this environment, the smaller, value
stocks, which the Fund favors, have enjoyed outperforming their larger brethren
for the first time since 1995. Over the past year, the Fund has been positioned
to benefit from this outperformance, as it has maintained a 3%
benchmark-relative overweight in Japan.
Elsewhere around the globe, Singapore and Hong Kong posted triple digit returns
as rate cuts and the stabilizing of property prices led these markets out of the
abyss they had fallen into last summer. In Europe, the introduction of the Euro
in January 1999 was received positively, however, it has done little to spark
any growth on the Continent. Unemployment in Europe remains above 10% and
productivity growth continues to be muted. In addition, manufacturing demand in
"core" Europe has been on a decline and, other than the peripheral market of
Finland (largely due to the performance of Nokia), much of Europe has remained
quite sluggish. The Fund continues to be underweight to the region.
Clearly, the past year has been one of global healing, but the financial leaders
of the world have done a brilliant job in restoring confidence to global markets
and managing several shocks to the world economy. While much remains to be done
in moving the world economy to a higher sustainable growth path, the increase in
the US Federal Funds rate at the end of second quarter 1999 is a clear
indication that the world has emerged from a crisis phase. Reinforcing this fact
is the outperformance of non-US small cap stocks relative to large cap stocks.
- --------------------------------------------------------
Top Ten Equity Holdings
(as a percent of Total Investments) August 31, 1999
- --------------------------------------------------------
Vodafone Airtouch PLC 2.1%
Nokia AB Oyj 1.9
Nippon Telegraph & Telephone Corp. 1.7
Deutsche Telekom AG 1.5
Roche Holdings Genusscheine AG NPV 1.3
British Telecom PLC 1.3
Elf Aquitaine SA 1.3
Internet Initiative Japan, Inc. - ADR 1.2
Toyota Motor Corp. 1.1
Atlantic Richfield Co. 2000 Warrants 1.1
- --------------------------------------------------------
---------------------
Notes: The following notes relate to the Growth of $10,000 graph and table on
the preceding page.
* The Fund commenced operations on March 7, 1995. Index comparison began
March 1, 1995.
** Morgan Stanley Capital International Europe, Australia, Far East Index is
an index composed of an arithmetic, market value-weighted average of the
performance of over 1,100 securities listed on the stock exchanges of the
countries of Europe, Australia, and the Far East. The Index is calculated
on a total-return basis, which includes reinvestment of net dividends
after deduction of withholding taxes.
+ Annualized.
Performance is historical and assumes reinvestment of all dividends and capital
gains. Investment return and principal value will fluctuate so that an
investor's shares, when redeemed, may be worth more or less than when purchased.
Past performance is not indicative of future results.
Investments in securities of non-US issuers and foreign currencies involve
investment risks different from those of US issuers. The Prospectus contains
further information and details regarding these risks.
Annual Report 7
<PAGE>
Report of Independent Accountants
To the Shareholders and Board of Trustees
of the SSgA Funds:
In our opinion, the accompanying statement of assets and liabilities and
statement of net assets, and the related statements of operations and of changes
in net assets and the financial highlights present fairly, in all material
respects, the financial position of SSgA Active International Fund (the "Fund")
at August 31, 1999, the results of its operations for the fiscal year then ended
and the changes in its net assets for each of the two fiscal years in the period
then ended, and the financial highlights for each of the four fiscal years in
the period then ended, and for the period March 7, 1995 (commencement of
operations) to August 31, 1995, in conformity with generally accepted accounting
principles. These financial statements and financial highlights (hereafter
referred to as "financial statements") are the responsibility of the Fund's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these financial
statements in accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of securities at August 31, 1999 by correspondence with the
custodian and brokers, provide a reasonable basis for the opinion expressed
above.
Boston, Massachusetts
October 11, 1999
/s/ PricewaterhouseCoopers LLP
8 Annual Report
<PAGE>
SSgA
Active International Fund
Statement of Net Assets
August 31, 1999
Market
Number Value
of (000)
Shares $
------ -------
Common Stocks - 98.9%
Australia - 0.0%
Commonwealth Bank of Australia 131 2
National Australia Bank, Ltd. 160 2
-------
4
-------
Austria - 0.3%
Austria Tabak AG 3,360 183
Brau-Union Goess-Reininghaus-
Osterreichische Brau AG 1,700 82
-------
265
-------
Belgium - 1.0%
Credit Communal Holding Dexia NPV
Class B 345 50
Delhaize-Le Lion NPV 1,500 128
Fortis B NPV (a) 11,700 402
Solvay SA NPV 430 30
Tractebel Investments
International NPV 1,100 201
UCB SA NPV 4,480 190
-------
1,001
-------
Denmark - 0.1%
Unidanmark Class A (Regd) 2,110 139
-------
Finland - 2.3%
Kemira Ojy 14,000 80
Nokia AB Oyj 22,838 1,909
Sonera Group Oyj 2,240 54
UPM-Kymmene Oyj 6,400 222
-------
2,265
-------
France - 10.9%
Aerospatiale Matra (a) 7,413 167
Alcatel Alsthom 880 135
Alstom (a) 2,600 88
AXA - UAP 4,950 617
Banque Nationale Paris 4,992 382
Chargeurs International SA (a) 2,900 173
Christian Dior SA 750 121
Cie de St. Gobain 1,080 209
Credit Lyonnais NPV (a) 16,000 491
Elf Aquitaine SA 7,399 1,299
Elf Gabon SA 300 32
Eridania Beghin-Say SA 250 33
Esso S.A.F 1,600 133
Eurafrance 111 68
France Telecom SA 8,469 660
Galeries Lafayette (a) 4,500 671
Groupe Air France (a) 11,350 197
Groupe Andre SA 553 82
GTM - Entrepose 179 20
L'Oreal (Societe) 700 453
Labinal SA (a) 1,000 141
Lafarge SA (BR) 2,190 236
Michelin (Cie Gen) Class B (Regd) 3,450 150
Paribas 2,687 286
Pechiney International Class A 8,458 493
Peugeot SA 1,800 331
Pinault-Printemps-Redoute SA (a) 1,600 278
Renault (Regie Nationale) 7,355 397
Rhone-Poulenc SA Class A - ADR 2,940 143
Sagem SA 675 175
Sanofi-Synthelabo SA (a) 15,468 645
Scor SA 4,400 220
Societe Generale 2,850 559
Sommer Allibert 1,400 38
Suez Lyonnaise des Eaux 1,850 309
Total Fina SA 810 105
Usinor Sacilor 8,862 137
Vivendi (a) 2,820 218
-------
10,892
-------
Annual Report 9
<PAGE>
SSgA
Active International Fund
Statement of Net Assets, continued
August 31, 1999
Market
Number Value
of (000)
Shares $
------ -------
Germany - 7.2%
Allianz AG (Regd) 2,419 638
AMB Aachener & Muenchener
Beteiligungs AG 2,200 186
BASF AG 14,000 635
Bayer AG 3,500 152
Bayerische Motoren Werke AG 520 16
DaimlerChrysler AG 12,493 944
DBV-Winterthur Holding AG 750 354
Deutsche Bank AG 10,250 702
Deutsche Lufthansa AG 4,518 87
Deutsche Telekom AG 33,846 1,500
Dyckerhoff AG 5,000 159
Holsten Brauere AG 80 15
Mannesmann AG 2,575 396
Muenchener Rueckversicherungs-
Gesellschaft AG NPV 50 10
Rheinmetall AG 6,200 131
SAP AG 205 72
Schmalbach Lubeca AG 950 130
Siemens AG NPV 6,400 539
Thyssen Krupp AG NPV (a) 14,804 346
Veba AG 2,350 150
-------
7,162
-------
Greece - 0.7%
Aegek SA 4,900 84
Aluminum Co. of Greece Industrial
and Commercial (Regd) 960 56
Commercial Bank of Greece (Regd) 950 92
Commercial Bank of Greece SA
Rights (a) 950 22
Credit Bank (Regd) 1,000 75
Hellas Can Packaging SA 660 38
Hellenic Telecommunication
Organization SA - GDR 1,040 22
Intracom SA 528 46
Michaniki SA (a) 6,040 158
National Bank of Greece (Regd) 1,100 81
Piraeus Bank SA 540 15
Titan Cement Co. SA 400 44
-------
733
-------
Hong Kong - 1.2%
Cheung Kong Holdings, Ltd. 9,000 79
CLP Holdings, Ltd. 12,500 59
First Pacific Co. 34,112 26
Guoco Group, Ltd. 9,000 27
Hang Lung Development Co. 13,000 15
Hang Seng Bank 9,000 102
Henderson Land Development Co.,
Ltd 7,000 37
Hong Kong & China Gas Co., Ltd. 40,300 57
Hong Kong Electric Holding, Ltd. 5,193 17
Hong Kong Land Holdings, Ltd. -
ADR (a) 14,173 21
Hong Kong Telecommunications, Ltd. 66,408 151
Hutchison Whampoa, Ltd. 24,000 233
Jardine Matheson Holdings, Ltd. -
ADR (a) 4,917 24
Jardine Strategic Holdings, Ltd. -
ADR (a) 23,000 53
Johnson Electric Holdings, Ltd. 7,500 34
Kumagai Gumi 1999 Warrants (a) 8,400 1
New World Development Co., Ltd. 7,000 17
Sino Land Co. 102,320 51
Sun Hung Kai Properties, Ltd. 13,000 109
Wing Lung Bank 6,200 26
Yue Yuen Industrial Holdings (a) 13,000 38
-------
1,177
-------
10 Annual Report
<PAGE>
SSgA
Active International Fund
Statement of Net Assets, continued
August 31, 1999
Market
Number Value
of (000)
Shares $
------ -------
Ireland - 2.0%
Avonmore Waterford Group PLC 15,900 24
Bank of Ireland 32,933 299
Bord Telecom Eireann PLC (a) 192,500 876
CRH PLC 10,841 243
Fyffes PLC 30,800 59
Independent Newspapers PLC 14,268 70
Irish Life & Permanent PLC 9,391 97
Jurys Hotel Group PLC 26,974 223
Kerry Group PLC Class A 10,364 126
Unidare PLC 3,100 7
-------
2,024
-------
Israel - 1.0%
Africa - Israel Investments, Ltd. 125 82
Agis Industries Ltd. (a) 8,745 47
Bank Hapoalim, Ltd. 61,495 142
Bank Leumi Le-Israel 41,500 72
Bezeq Israeli Telecommunication
Corp., Ltd. (a) 30,950 112
ECI Telecom, Ltd. 4,340 123
Elco Holdings, Ltd. (a) 9,030 73
IDB Holding Corp., Ltd. 2,530 68
Israel Chemicals, Ltd. 46,275 45
Koor Industries 620 54
Scitex, Ltd. (a) 3,560 33
Teva Pharmaceutical Industries,
Ltd 2,250 106
-------
957
-------
Italy - 3.0%
Assicurazioni Generali SPA 6,688 226
Banca Popolaire di Bergamo CV 7,900 162
Burgo (Cartiere) SPA 10,000 73
Compagnia Assicuratrice Unipol
1999 Warrants (a) 15,200 5
Danieli & Co. di Risp 14,000 44
Ente Nazionale Idrocarburi SPA
(Regd) 110,400 665
Fiat SPA 11,298 181
Istituto Mobiliare Italiano SPA 12,020 162
Istituto Nazionale Delle
Assicurazioni 32,200 78
Pirelli & Co. di Risp 53,000 79
Recordati di Risp 15,000 68
Telecom Italia Mobile SPA 30,000 175
Telecom Italia Mobile SPA di Risp 120,000 415
Telecom Italia SPA (a) 113,825 654
Toro Assicurazioni 2000 Warrants (a) 1,600 8
-------
2,995
-------
Japan - 29.2%
Acom Co., Ltd. 3,700 376
Alinco, Inc. (a) 2,000 6
Amada Co., Ltd. 18,000 151
Amada Metrecs Co. 29,000 205
Aoki International 44,000 202
Asahi Bank, Ltd. 49,000 300
Autobacs Seven Co., Ltd. 6,100 324
Azel Corp. 19,000 79
Bank of Tokyo - Mitsubishi, Ltd. 57,000 852
Benesse Corp. 4,000 695
Bridgestone Tire Corp. 17,000 483
Brother Industries 51,000 149
Canon, Inc. 22,000 644
Casio Computer Co., Ltd. 21,000 146
Chiyoda Co., Ltd. 12,000 97
Chugoku Electric Power 9,400 155
Chuo Trust & Banking 11,000 72
Dai Ichi Kangyo Bank 8,000 84
Dainippon Ink and Chemical, Inc. 28,000 109
Daito Trust Construction 14,900 194
Daiwa Bank 98,000 313
Daiwa Industries, Ltd. 16,000 62
Annual Report 11
<PAGE>
SSgA
Active International Fund
Statement of Net Assets, continued
August 31, 1999
Market
Number Value
of (000)
Shares $
------ -------
Denki Kagaku Kogyo 35,000 82
East Japan Railway Co. 38 230
Eiden Sakakiya Co., Ltd. 16,000 196
Eisai Co. 6,000 139
Fanuc Co. 4,200 254
Fuji Bank, Ltd. 45,000 465
Fuji Heavy Industries, Ltd. 40,000 319
Fuji Photo Film Co. 4,000 146
Fujitsu, Ltd. 5,000 147
Futaba Industrial 9,000 130
Hikari Tsushin, Inc. 750 396
Hisamitsu Pharmaceutical Co. 15,000 224
Hitachi, Ltd. 41,000 417
Hokkai Can Co. 23,000 63
Hokkaido Electric Power Co., Inc. 6,800 106
Hokkaido Takushoku Bank, Ltd. (a)(c) 130,000 0
Honda Motor Co., Ltd. 21,000 846
Inabata & Co. 12,000 53
Industrial Bank of Japan, Ltd. 35,000 357
Internet Initiative Japan, Inc. - ADR 24,209 1,244
Ito-Yokado Co., Ltd. 2,000 147
Itochu Fuel Corp. 52,000 183
Japan Energy Corp. 108,000 138
JGC Corp. (a) 61,000 165
Kamigumi Co., Ltd. 63,000 380
Kansai Electric Power Co., Inc. 10,700 206
Kao Corp. 6,000 171
Kawasho Corp. 48,000 74
Konami Co., Ltd. 5,400 474
Kyocera Corp. 4,000 263
Mabuchi Motor Co., Ltd. 2,000 250
Maeda Corp. 27,000 106
Marubeni Corp. 123,000 291
Matsushita Electric Industrial
Co., Ltd. 25,000 494
Mazda Motor Corp. (a) 26,000 146
Mitsubishi Corp. 23,000 192
Mitsui Petrochemical Industry 56,000 410
Morita Corp. 17,000 52
Mycal Corp. 17,000 103
Nichia Steel Works 800 5
Nichicon Corp. 14,000 275
Nintendo Co., Ltd. 1,000 174
Nippon Chemi-Con Co., Ltd. 16,000 78
Nippon Denso Co. 6,000 134
Nippon Express Co., Ltd. 24,000 184
Nippon Hodo Co., Ltd. 39,000 250
Nippon Shinpan Co. 64,000 222
Nippon Steel Corp. 81,000 213
Nippon Telegraph & Telephone Corp. 158 1,777
Nissho Corp. 15,000 149
Nittoc Construction Co. 19,000 64
Nomura Securities Co., Ltd. 6,000 88
NTT Mobile Communications Network,
Inc. New (a) 24 397
NTT Mobile Communications Network,
Inc. NPV 6 100
Okabe Co. 21,000 75
Ono Pharmaceutical 10,000 327
Orient Corp. 71,000 207
Rohm Co. 1,000 199
Ryosan Co. 11,000 283
Sakura Bank, Ltd. 48,000 255
Sankyo Co., Ltd. 13,000 363
Sanshin Electronics 11,000 113
Santen Pharmaceutical Co., Ltd. 13,000 345
Sanwa Bank 10,000 137
Sanyo Shinpan Finance Co. 2,000 118
Seino Transportation 24,000 153
Sekisui House, Ltd. 9,000 97
Senshukai Co. 18,000 324
Sintokogio 22,000 62
Sony Corp. 3,100 402
Sony Music Entertainment, Inc. 1,900 202
Sumitomo Bank 27,000 370
Sumitomo Realty & Development 96,000 385
Taiyo Yuden Co., Ltd. 10,000 215
12 Annual Report
<PAGE>
SSgA
Active International Fund
Statement of Net Assets, continued
August 31, 1999
Market
Number Value
of (000)
Shares $
------ -------
Takara Standard Co., Ltd. 29,000 185
Takeda Chemical Industries 9,000 453
Takefuji Corp. 2,200 354
Takuma Co. 16,000 172
TDK Corp. 2,000 243
Toenec Corp. 37,000 170
Tokyo Electric Co., Ltd. 57,000 215
Tokyo Electric Power 16,500 385
Toyo Suisan Kaisha 25,000 274
Toyota Motor Corp. 39,000 1,153
Uniden Corp. 28,000 302
Yakult Honsha Co., Ltd. 38,000 553
Yamaha Motor Co. 23,000 207
-------
29,165
-------
Luxembourg - 1.1%
Atlantic Richfield Co. 2000
Warrants (a) 12,308 1,083
-------
Netherlands - 5.0%
ABN Amro Holdings NV 21,283 519
Aegon NV 900 79
DSM NV (BR) 3,564 420
Fortis NV 60 2
Heineken NV 1,286 64
Hollandsche Beton Groep NV 9,880 117
ING Groep NV 16,836 924
KLM NV 10,152 279
Koninklijke (Royal) Philips
Electronics NV (a) 3,963 409
Koninklijke Ahold NV 4,781 171
Koninklijke Boskalis Westminster NV 16,831 293
Koninklijke Hoogovens NV 5,094 295
Koninklijke Nedlloyd NV 5,157 147
Royal Dutch Petroleum Co. 9,270 571
TNT Post Group NV 29 1
Unilever NV (a) 7,638 532
Van Ommeren (Kon) CVA 4,964 171
-------
4,994
-------
Norway - 1.1%
Bergesen DY AS Series B 14,600 213
Christiania Bank OG Kreditkasse 48,012 204
Elkem ASA Series A 13,500 241
Kvaerner Industries ASA Series B (a) 3,300 59
Norske Skogindustrier AS Class A 6,000 247
SAS Norske ASA Series B 8,356 80
Storebrand ASA Series A (a) 7,600 50
-------
1,094
-------
Pakistan - 0.2%
Dewan Salmon Fibre (a) 13,886 9
Fauji Fertilizer 39,500 39
Hub Power Co. - GDR (a) 5,720 50
Pakistan State Oil 18,720 45
Pakistan Telecommunications Corp.
- GDS (a) 930 38
Sui Northern Gas Pipelines (a) 39,542 7
Sui Southern Gas Co., Ltd. (a) 72,737 14
-------
202
-------
Portugal - 0.2%
Electricidade de Portugal SA 13,069 221
-------
Singapore - 1.8%
City Developments 10,000 61
DBS Land 18,000 41
Development Bank 10,350 119
Development Bank of Singapore,
Ltd. (Alien Market) 9,000 106
Elec & Eltek International Co.,
Ltd. (a) 5,000 18
Hai Sun Hup Group (a) 39,000 17
Annual Report 13
<PAGE>
SSgA
Active International Fund
Statement of Net Assets, continued
August 31, 1999
Market
Number Value
of (000)
Shares $
------ -------
Haw Par Brothers International,
Ltd 24,000 40
Keppel Bank 14,000 30
Keppel Bank 2000 Warrants (a) 7,250 3
Keppel Corp. (a) 18,000 58
Mandarin Oriental International,
Ltd. (a) 37,464 25
Marco Polo Developments, Ltd. 25,000 37
Metro Holdings, Ltd. (a) 10,400 13
Natsteel Electronics, Ltd. 13,000 65
Overseas Chinese Banking Corp.,
Ltd. (Alien Market) 24,672 173
Overseas Union Bank (Alien Market) 13,200 69
Singapore Airlines, Ltd. (Alien
Market) 28,000 263
Singapore Land 12,000 29
Singapore Press Holdings, Ltd. 7,090 118
Singapore Technologies
Engineering, Ltd. 35,000 42
Singapore Telecommunications, Ltd. 122,000 217
United Industrial Corp., Ltd. 64,000 37
United Overseas Bank, Ltd. (Alien
Market) 17,000 126
United Overseas Land 71,000 66
Want Want Holdings, Ltd. 29,000 54
-------
1,827
-------
South Korea - 1.0%
Daewoo Corp. 6,420 10
Daewoo Electronics Co. (a) 4,410 8
Daewoo Heavy Industries 5,620 9
Daewoo Securities Co. (a) 1,515 28
Daewoo Securities Co. Rights (a) 370 2
Dongwon Securities 1,180 29
Hana Bank 1,950 17
Hanjin Shipping Co. (a) 990 15
Hanvit Bank - GDR 1,800 14
Housing & Commercial Bank, Korea (a) 570 13
Kookmin Bank 2,220 31
Koram Bank 2,190 17
Korea Electric Power Corp. 1,900 71
Korea Telecom Corp. - ADR (a) 300 10
Korean Air (a) 1,060 21
L.G. Information & Communication (a) 300 27
LG Chemical, Ltd. 810 26
LG Electronics 1,440 61
LG Insurance Co., Ltd. 5,100 33
Oriental Chemical Industries Co., Ltd. 1,460 28
Pohang Iron & Steel Co., Ltd. 590 79
Samsung Display Devices Co. (a) 560 32
Samsung Electro-Mechanics Co. 468 25
Samsung Electronics Co., Ltd. 1,440 273
Samsung Fire & Marine Insurance
Co. (a) 600 30
Samsung Heavy Industries (a) 5,460 50
Samsung Securities Co., Ltd. 900 35
Ssangyong Oil Refining Co., Ltd. 1,180 30
-------
1,024
-------
Spain - 2.9%
Banco Bilbao Vizcaya SA 6,850 91
Banco Santander Central Hispano SA (a) 8,100 81
Compania Espanola de Petroleos SA 1,800 22
Endesa SA 30,624 616
Hidroelectrica del Cantabrico SA 3,150 45
Iberdrola SA 7,405 107
Repsol SA (a) 31,872 666
Sogecable SA (a) 22,500 614
Telefonica SA (a) 34,620 552
Union Electrica Fenosa SA 5,200 74
-------
2,868
-------
14 Annual Report
<PAGE>
SSgA
Active International Fund
Statement of Net Assets, continued
August 31, 1999
Market
Number Value
of (000)
Shares $
------ -------
Sweden - 1.2%
Electrolux AB Series B 15,688 316
Gambro AB Series A (a) 8,660 90
Skand Enskilda Barken Series A 22,498 234
Svenska Handelsbanken AB Series A (a) 15,674 218
Telefonaktiebolaget Ericsson (LM)
Series B 11,197 362
-------
1,220
-------
Switzerland - 6.2%
ABB, Ltd. (a) 2,130 218
Baloise Holding, Ltd. (Regd.) 210 176
Bobst AG (BR) 50 60
Credit Suisse Group (Regd) 1,799 340
Fischer (Georg) AG (Regd) 180 55
Forbo Holding AG (Regd) 130 52
Helvetia Patria Holding Co. (Regd) 320 262
Jelmoli Holding AG (Regd) 710 146
Nestle SA (Regd) 336 664
Novartis AG (Regd) 726 1,046
Roche Holdings Genusscheine AG NPV 118 1,367
Schweiz Ruckversicher (Regd) 194 379
SGS Holding (BR) (a) 124 141
Swisscom AG (Regd) 248 82
UBS AG (Regd.) 2,451 693
Vontobel Holding AG (Regd.) 83 137
Zurich Allied AG (Regd.) 703 413
-------
6,231
-------
Thailand - 0.0%
Finance One Public Co., Ltd.
(Alien Market)(a)(c) 31,600 0
-------
United Kingdom - 19.3%
Abbey National PLC 13,200 227
Allied Zurich PLC 35,169 428
Anglian Water PLC 14,368 171
Bank of Scotland Governor & Co. PLC 10,415 130
Barclays PLC 27,214 809
Berisford PLC 57,600 279
BG PLC 84,249 507
Billiton PLC 38,390 156
Britannic PLC (a) 6,200 100
British Energy PLC 24,008 200
British Land Co. PLC 2,841 24
British Petroleum Amoco Co. PLC 31,982 593
British Steel PLC 38,432 101
British Telecom PLC 87,440 1,339
Cable & Wireless PLC 17,763 203
Carillion PLC (a) 352 1
Courtaulds Textile Co. PLC 29,800 80
Daily Mail and General Trust PLC
Class A 1,834 103
Diageo PLC 25,423 258
Enterprise Oil PLC 20,636 150
FKI Babcock PLC 64,829 222
General Electric Co. PLC 20,279 203
Glaxo Wellcome PLC 38,643 1,015
Granada Group PLC 28,518 254
Greenalls Group PLC 17,820 108
Halifax PLC 29,358 328
Hanson PLC 13,587 116
HSBC Holdings PLC 17,700 219
Hyder PLC 18,397 166
Imperial Chemical Industries PLC 34,933 397
Imperial Tobacco Group PLC 11,068 128
Invensys PLC 61,991 317
Kingfisher PLC 26,048 313
Land Securities PLC 7,500 106
Lloyds TSB Group PLC 31,661 438
Lonrho PLC 16,370 150
Mirror Group News PLC 13,000 53
Northern Foods PLC 65,746 137
Norwich Union PLC 31,100 212
Pearson PLC 4,701 97
Annual Report 15
<PAGE>
SSgA
Active International Fund
Statement of Net Assets, continued
August 31, 1999
Market
Number Value
of (000)
Shares $
------ -------
Reuters Group PLC 32,561 479
Royal Bank of Scotland Group PLC 43,507 897
Safeway PLC 66,400 276
Sears PLC (c) 22,400 129
Selfridges PLC 22,400 99
Severn Trent PLC 7,383 107
Shell Transportation & Trading PLC
(Regd) 75,229 600
Signet Group PLC (a) 463,552 397
Slough Estates PLC 30,900 180
SmithKline Beecham PLC 58,791 765
Somerfield PLC 31,578 118
Tarmac PLC (a) 352 3
Tesco Store Holdings PLC 85,698 254
Thames Water PLC 19,921 287
Tomkins PLC 43,440 189
Unilever PLC (a) 7,155 67
United Utilities PLC 10,909 130
Vodafone Airtouch PLC 105,024 2,115
Wimpey (George), Ltd. PLC 50,026 121
Yorkshire Water PLC 35,058 230
Zeneca Group PLC 24,131 958
-------
19,239
-------
Total Common Stocks
(cost $83,123) 98,782
-------
Preferred Stocks - 0.9%
Austria - 0.0%
Bau Holdings AG 800 27
-------
Germany - 0.9%
Dyckerhoff AG 2,330 79
M.A.N. AG (a) 6,650 144
ProSieben Media AG NV 2,650 119
Rheinmetall AG 1,150 18
RWE AG 11,700 374
Volkswagen AG 3,700 127
-------
861
-------
Total Preferred Stocks
(cost $934) 888
-------
Principal
Amount
(000)
---------
Long-Term Investments - 0.3%
Germany - 0.0% Deutsche Finance BV (conv.)
1.000% due 05/02/01 (a) DEM 60 40
-------
Italy - 0.1% Italy, Republic of (conv.)
5.000% due 06/28/01 (a) $ 35 61
-------
Japan - 0.2%
MTI Capital (Cayman), Ltd. (conv.)
0.500% due 10/01/07 (a) JPY 39,000 243
-------
Total Long-Term Investments
(cost $256) 344
-------
Short-Term Investments - 2.3%
AIM Short-Term Investment Prime
Portfolio Class A (b) $1,297 1,297
Federated Investors Prime Cash
Obligations Fund (b) 988 988
-------
Total Short-Term Investments
(cost $2,285) 2,285
-------
16 Annual Report
<PAGE>
SSgA
Active International Fund
Statement of Net Assets, continued
August 31, 1999
Market
Value
(000)
$
-------
Total Investments - 102.4%
(identified cost $86,598) 102,299
Other Assets and Liabilities,
Net - (2.4%) (2,383)
-------
Net Assets - 100.0% 99,916
=======
(a) Nonincome-producing security.
(b) At cost, which approximates market.
(c) These securities have been valued by the Security Valuation Committee of
the Board of Trustees. It is possible that the estimated value may differ
significantly from the amount that might ultimately be realized.
Abbreviations:
ADR - American Depositary Receipt
BR - Bearer
GDR - Global Depositary Receipt
GDS - Global Depositary Share
NPV - No Par Value
NV - Nonvoting
Foreign Currency Abbreviations:
AUD - Australian dollar
CHF - Swiss frank
DEM - German mark
EUR - Eurodollar
GBP - British pound
HKD - Hong Kong dollar
JPY - Japanese yen
NOK - Norwegian krona
SEK - Swedish krona
SGD - Singapore dollar
USD - United States dollar
See the accompanying notes which are an integral part of the financial
statements.
Annual Report 17
<PAGE>
SSgA
Active International Fund
Statement of Net Assets, continued
August 31, 1999
Market
% of Value
Net (000)
Industry Diversification Assets $
- ------------------------ ------ -------
Basic Industries 7.1% 7,098
Capital Goods 5.3 5,326
Consumer Basics 13.6 13,582
Consumer Durables 6.5 6,490
Consumer Non-Durables 4.5 4,476
Consumer Services 1.0 1,041
Energy 7.4 7,373
Finance 21.4 21,354
General Business 4.0 3,951
Miscellaneous 3.7 3,649
Shelter 0.9 893
Technology 8.0 7,973
Transportation 1.8 1,826
Utilities 14.6 14,638
Long-Term Investments 0.3 344
Short-Term Investments 2.3 2,285
------ -------
Total Investments 102.4 102,299
Other Assets and Liabilities, Net (2.4) (2,383)
------ -------
Net Assets 100.0% 99,916
====== =======
Market
% of Value
Net (000)
Geographic Diversification Assets $
- -------------------------- ------ -------
Europe 46.1% 46,075
Japan 29.2 29,165
Middle East 1.2 1,159
Pacific Basin 4.0 4,031
United Kingdom 19.3 19,240
Long-Term Investments 0.3 344
Short-Term Investments 2.3 2,285
------ -------
Total Investments 102.4 102,299
Other Assets and Liabilities, Net (2.4) (2,383)
------ -------
Net Assets 100.0% 99,916
====== =======
See the accompanying notes which are an integral part of the financial
statements.
18 Annual Report
<PAGE>
SSgA
Active International Fund
Statement of Net Assets, continued
August 31, 1999
Forward Foreign Currency Exchange Contracts
Unrealized
Appreciation
Contracts to In Exchange Settlement (Depreciation)
Deliver (000) for (000) Date (000)
- ------------- ----------- ---------- --------------
USD 2,944 AUD 4,435 09/24/99 (111)
USD 15,159 EUR 14,443 09/24/99 149
USD 4,822 GBP 3,013 09/24/99 26
USD 6,416 JPY 754,061 09/24/99 507
USD 1,456 SEK 12,281 09/24/99 39
EUR 14,443 USD 15,117 09/24/99 (191)
GBP 2,203 USD 3,506 09/24/99 (39)
JPY 978,572 USD 8,189 09/24/99 (795)
SEK 4,729 USD 579 09/24/99 3
-------------
(412)
=============
See the accompanying notes which are an integral part of the financial
statements.
Annual Report 19
<PAGE>
SSgA
Active International Fund
Statement of Assets and Liabilities
Amounts in thousands (except per share amount) August 31, 1999
<TABLE>
<S> <C> <C>
Assets
Investments at market (identified cost $86,598) ................................................ $ 102,299
Foreign currency holdings (identified cost $1,207) ............................................. 1,218
Forward foreign currency exchange contracts (cost $58,187) ..................................... 58,798
Foreign currency exchange spot contracts (cost $2,785) ......................................... 2,806
Receivables:
Dividends and interest ...................................................................... 231
Investments sold ............................................................................ 522
Fund shares sold ............................................................................ 328
Foreign taxes recoverable ................................................................... 81
Deferred organization expenses ................................................................. 5
Short-term investments held as collateral for securities loaned, at market ..................... 12,791
-----------
Total Assets ............................................................................. 179,079
Liabilities
Payables:
Investments purchased ..................................................... $ 4,136
Fund shares redeemed ...................................................... 62
Accrued fees to affiliates ................................................ 155
Other accrued expenses .................................................... 24
Forward foreign currency exchange contracts (cost $58,187) ................... 59,210
Foreign currency exchange spot contracts (cost $2,785) ....................... 2,785
Payable upon return of securities loaned, at market .......................... 12,791
-----------
Total Liabilities ........................................................................ 79,163
-----------
Net Assets ..................................................................................... $ 99,916
===========
Net Assets Consist of:
Undistributed net investment income ............................................................ $ 731
Accumulated net realized gain (loss) ........................................................... (3,074)
Unrealized appreciation (depreciation) on:
Investments ................................................................................. 15,701
Foreign currency-related transactions ....................................................... (428)
Shares of beneficial interest .................................................................. 10
Additional paid-in capital ..................................................................... 86,976
-----------
Net Assets ..................................................................................... $ 99,916
===========
Net Asset Value, offering and redemption price per share:
($99,916,080 divided by 9,639,072 shares of $.001 par value
shares of beneficial interest outstanding) ............................................... $ 10.37
===========
</TABLE>
See the accompanying notes which are an integral part of the financial
statements.
20 Annual Report
<PAGE>
SSgA
Active International Fund
Statement of Operations
Amounts in thousands For the Fiscal Year Ended August 31, 1999
<TABLE>
<S> <C> <C>
Investment Income
Dividends (net of foreign taxes withheld of $276) ......................... $ 2,013
Interest .................................................................. 148
---------
Total Investment Income ................................................ 2,161
Expenses
Advisory fees .................................................. $ 705
Administrative fees ............................................ 65
Custodian fees ................................................. 321
Distribution fees .............................................. 36
Transfer agent fees ............................................ 40
Professional fees .............................................. 27
Registration fees .............................................. 33
Shareholder servicing fees ..................................... 39
Trustees' fees ................................................. 3
Amortization of deferred organization expenses ................. 8
Miscellaneous .................................................. 7
---------
Expenses before reductions ..................................... 1,284
Expense reductions ............................................. (344)
---------
Expenses, net .......................................................... 940
---------
Net investment income ........................................................ 1,221
---------
Net Realized and Unrealized Gain (Loss)
Net realized gain (loss) on:
Investments .................................................... (275)
Futures contracts .............................................. 185
Equity swap .................................................... 1,179
Foreign currency-related transactions .......................... 276 1,365
---------
Net change in unrealized appreciation (depreciation) on:
Investments .................................................... 21,077
Equity swap .................................................... (65)
Foreign currency-related transactions .......................... (652) 20,360
--------- ---------
Net realized and unrealized gain (loss) ...................................... 21,725
---------
Net increase (decrease) in net assets resulting from operations .............. $ 22,946
=========
</TABLE>
See the accompanying notes which are an integral part of the financial
statements.
Annual Report 21
<PAGE>
SSgA
Active International Fund
Statement of Changes in Net Assets
Amounts in thousands For the Fiscal Years Ended August 31,
<TABLE>
<CAPTION>
1999 1998
--------- ---------
<S> <C> <C>
Increase (Decrease) in Net Assets
Operations
Net investment income ............................................... $ 1,221 $ 1,291
Net realized gain (loss) ............................................ 1,365 4,220
Net change in unrealized appreciation (depreciation) ................ 20,360 (586)
--------- ---------
Net increase (decrease) in net assets resulting from operations .. 22,946 4,925
--------- ---------
Distributions
From net investment income .......................................... (3,396) (1,176)
From net realized gain on investments ............................... (3,495) (3,891)
In excess of net realized gain on investments ....................... (2,504) --
--------- ---------
Net decrease from distributions .................................. (9,395) (5,067)
--------- ---------
Share Transactions
Net increase (decrease) in net assets from share transactions ....... 9,800 (7,223)
--------- ---------
Total Net Increase (Decrease) in Net Assets ............................ 23,351 (7,365)
Net Assets
Beginning of period ................................................. 76,565 83,930
--------- ---------
End of period (including undistributed net investment income of
$731 and $2,331, respectively) ................................... $ 99,916 $ 76,565
========= =========
</TABLE>
See the accompanying notes which are an integral part of the financial
statements.
22 Annual Report
<PAGE>
SSgA
Active International Fund
Financial Highlights
The following table includes selected data for a share outstanding throughout
each period and other performance information derived from the financial
statements.
<TABLE>
<CAPTION>
Fiscal Years Ended August 31,
-------------------------------------------------------------
1999 1998 1997 1996 1995*
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period ........... $ 9.24 $ 10.85 $ 10.96 $ 10.89 $ 10.00
--------- --------- --------- --------- ---------
Income From Operations
Net investment income (a) ................... .12 .16 .10 .36 .03
Net realized and unrealized gain (loss) ..... 2.09 (1.13) .03 .28 .86
--------- --------- --------- --------- ---------
Total Income From Operations ............. 2.21 (.97) .13 .64 .89
--------- --------- --------- --------- ---------
Distributions
From net investment income .................. (.39) (.15) (.18) (.57) --
From net realized gain on investments ....... (.69) (.49) (.06) -- --
--------- --------- --------- --------- ---------
Total Distributions ...................... (1.08) (.64) (.24) (.57) --
--------- --------- --------- --------- ---------
Net Asset Value, End of Period ................. $ 10.37 $ 9.24 $ 10.85 $ 10.96 $ 10.89
========= ========= ========= ========= =========
Total Return (%)(b) ............................ 26.88 (9.50) 1.17 6.22 8.90
Ratios/Supplemental Data:
Net Assets, end of period ($ in thousands) .. 99,916 76,565 83,930 54,595 25,186
Ratios to average net assets (%)(c):
Operating expenses, net (d) .............. 1.00 1.00 1.00 1.00 1.79
Operating expenses, gross (d) ............ 1.37 1.29 1.40 1.47 2.56
Net investment income .................... 1.30 1.23 1.12 1.16 1.11
Portfolio turnover rate (%)(c) .............. 62.02 74.79 48.29 22.02 7.17
</TABLE>
* For the period March 7, 1995 (commencement of operations) to August 31
1995.
(a) For the period subsequent to August 31, 1998, average month-end shares
outstanding were used for this calculation.
(b) Periods less than one year are not annualized.
(c) The ratios for the period ended August 31, 1995 are annualized.
(d) See Note 4 for current period amounts.
Annual Report 23
<PAGE>
SSgA
Active International Fund
Notes to Financial Statements
August 31, 1999
1. Organization
The SSgA Funds (the "Investment Company") is a series mutual fund,
currently comprised of 23 investment portfolios which are in operation as
of August 31, 1999. These financial statements report on one portfolio,
the SSgA Active International Fund (the "Fund"). The Investment Company is
a registered and diversified open-end investment company, as defined in
the Investment Company Act of 1940, as amended (the "1940 Act"), that was
organized as a Massachusetts business trust on October 3, 1987 and
operates under a First Amended and Restated Master Trust Agreement, dated
October 13, 1993, as amended (the "Agreement"). The Investment Company's
Agreement permits the Board of Trustees to issue an unlimited number of
full and fractional shares of beneficial interest at a $.001 par value.
2. Significant Accounting Policies
The Fund's financial statements are prepared in accordance with generally
accepted accounting principles which require the use of management
estimates. The following is a summary of the significant accounting
policies consistently followed by the Fund in the preparation of its
financial statements.
Security valuation: International equity and fixed-income securities
traded on a national securities exchange are valued on the basis of the
last sale price. International securities traded over the counter are
valued on the basis of the mean of bid prices. In the absence of a last
sale or mean bid price, respectively, such securities may be valued on the
basis of prices provided by a pricing service if those prices are believed
to reflect the market value of such securities.
Money market instruments maturing within 60 days of the valuation date are
valued at amortized cost, a method by which each portfolio instrument is
initially valued at cost, and thereafter a constant accretion/amortization
to maturity of any discount or premium is assumed, unless the Board of
Trustees determines that amortized cost does not represent fair value.
The Fund may value certain securities for which market quotations are not
readily available at "fair value," as determined in good faith pursuant to
procedures established by the Board of Trustees.
Securities transactions: Securities transactions are recorded on the trade
date basis. Realized gains and losses from the securities transactions are
recorded on the basis of identified cost.
Investment income: Dividend income is recorded on the ex-dividend date and
interest income is recorded daily on the accrual basis.
Amortization and accretion: All zero-coupon bond discounts and original
issue discounts are accreted for both tax and financial reporting
purposes. All short- and long-term market premiums/discounts are
amortized/accreted for both tax and financial reporting purposes.
Federal income taxes: Since the Investment Company is a Massachusetts
business trust, each fund is a separate corporate taxpayer and determines
its net investment income and capital gains (or losses) and the amounts to
be distributed to each fund's shareholders without regard to the income
and capital gains (or losses) of the other funds.
24 Annual Report
<PAGE>
SSgA
Active International Fund
Notes to Financial Statements, continued
August 31, 1999
It is the Fund's intention to qualify as a regulated investment company,
as defined by the Internal Revenue Code of 1986, as amended. This requires
the Fund to distribute all of its taxable income. Therefore, the Fund paid
no federal income taxes and no federal income tax provision was required.
At August 31, 1999, the Fund had a net tax basis capital loss carryover of
$3,074,685, which may be applied against any realized net taxable gains in
each succeeding year or until its expiration date of August 31, 2007. As
permitted by tax regulations, the Fund intends to defer a net realized
currency loss of $358,398 incurred from November 1, 1998 to August 31,
1999, and treat it as arising in fiscal year 2000.
The Fund's aggregate cost of investments and the composition of unrealized
appreciation and depreciation of investment securities for federal income
tax purposes as of August 31, 1999 are as follows:
Net Unrealized
Federal Tax Unrealized Unrealized Appreciation
Cost Appreciation (Depreciation) (Depreciation)
------------- ------------ -------------- --------------
$ 87,225,018 $ 19,805,691 $ (4,731,376) $ 15,074,315
Dividends and distributions to shareholders: Income dividends and capital
gain distributions, if any, are recorded on the ex-dividend date. The Fund
declares and pays dividends annually. Capital gain distributions, if any,
are generally declared and paid annually. An additional distribution may
be paid by the Fund to avoid imposition of federal income tax on any
remaining undistributed net investment income and capital gains.
The timing and characterization of certain income and capital gain
distributions are determined in accordance with federal tax regulations
which may differ from generally accepted accounting principles ("GAAP").
As a result, net investment income and net realized gain (or loss) on
investment and foreign currency-related transactions for a reporting
period may differ significantly from distributions during such period. The
differences between tax regulations and GAAP relate primarily to
investments in foreign denominated investments, forward contracts, passive
foreign investment companies and certain securities sold at a loss.
Accordingly, the Fund may periodically make reclassifications among
certain of its capital accounts without impacting its net asset value.
Expenses: Most expenses can be directly attributed to the individual Fund.
Expenses which cannot be directly attributed are allocated among all funds
based principally on their relative net assets.
Deferred organization expenses: The Fund has incurred expenses in
connection with its organization. These costs were deferred and are being
amortized over 60 months on a straight-line basis.
Foreign currency translations: The books and records of the Fund are
maintained in US dollars. Foreign currency amounts and transactions of the
Fund are translated into US dollars on the following basis:
(a) Market value of investment securities, other assets and liabilities
at the closing rate of exchange on the valuation date.
(b) Purchases and sales of investment securities and income at the
closing rate of exchange prevailing on the respective trade dates of
such transactions.
Annual Report 25
<PAGE>
SSgA
Active International Fund
Notes to Financial Statements, continued
August 31, 1999
Reported net realized gains or losses from foreign currency-related
transactions arise from sales and maturities of short-term securities;
sales of foreign currencies; currency gains or losses realized between the
trade and settlement dates on securities transactions; and the difference
between the amounts of dividends, interest, and foreign withholding taxes
recorded on the Fund's books and the US dollar equivalent of the amounts
actually received or paid. Net unrealized gains or losses from foreign
currency-related transactions arise from changes in the value of assets
and liabilities, other than investments in securities, at fiscal year-end,
resulting from changes in the exchange rates.
It is not practical to isolate that portion of the results of operations
of the Fund that arises as a result of changes in exchange rates, from
that portion that arises from changes in market prices of investments
during the year. Such fluctuations are included with the net realized and
unrealized gain or loss from investments. However, for federal income tax
purposes the Fund does isolate the effects of changes in foreign exchange
rates from the fluctuations arising from changes in market prices for
realized gain (or loss) on debt obligations.
Derivatives: To the extent permitted by the investment objectives,
restrictions and policies set forth in the Fund's Prospectus and Statement
of Additional Information, the Fund may participate in various
derivative-based transactions. Derivative securities are instruments or
agreements whose value is derived from an underlying security or index.
They include options, futures, swaps, forwards, structured notes and
stripped securities. These instruments offer unique characteristics and
risks that assist the Fund in meeting its investment strategies.
The Fund typically uses derivatives in three ways: cash equitization,
hedging, and return enhancement. Cash equitization is a technique that may
be used by the Fund through the use of options and futures to earn
"market- like" returns with the Fund's excess and liquidity reserve cash
balances. Hedging is used by the Fund to limit or control risks, such as
adverse movements in exchange rates and interest rates. Return enhancement
can be accomplished through the use of derivatives in the Fund. By
purchasing certain instruments, the Fund may more effectively achieve the
desired portfolio characteristics that assist in meeting the Fund's
investment objectives. Depending on how the derivatives are structured and
utilized, the risks associated with them may vary widely. These risks are
generally categorized as market risk, liquidity risk and counterparty or
credit risk.
Foreign currency exchange contracts: In connection with portfolio
purchases and sales of securities denominated in a foreign currency, the
Fund may enter into foreign currency exchange spot contracts and forward
foreign currency exchange contracts ("contracts"). Contracts are recorded
at market value. Certain risks may arise upon entering into these
contracts from the potential inability of counterparties to meet the terms
of their contracts and are generally limited to the amount of unrealized
gain on the contracts, if any, that are recognized in the accompanying
Statement of Assets and Liabilities. Realized gains or losses arising from
such transactions are included in net realized gain (or loss) from foreign
currency-related transactions. Open foreign contracts at August 31, 1999
are presented in the accompanying Statement of Net Assets.
Futures: The Fund is currently utilizing exchange-traded futures
contracts. The primary risks associated with the use of futures contracts
are an imperfect correlation between the change in market value of the
securities held by the Fund and the prices of futures contracts and the
possibility of an illiquid market. Changes in initial settlement value are
accounted for as unrealized appreciation (depreciation) until the
contracts are terminated, at which time realized gains and losses are
recognized.
26 Annual Report
<PAGE>
SSgA
Active International Fund
Notes to Financial Statements, continued
August 31, 1999
Equity swaps: The Fund may enter into equity swap agreements in order to
efficiently participate in certain foreign markets. Pursuant to this
agreement, the Fund pays the swap counterparty based on the notional
amount and an agreed upon rate (i.e. 12-month USD LIBOR BBA rate). During
the term of the agreement, changes in the underlying value of the swap is
recorded as unrealized gain (loss) and is based on changes in the value of
the underlying index. The underlying index is valued at the published
daily closing price. Accrued interest expense to be paid to the swap
counterparty or accrued interest income to be paid to the Fund, at the
agreed upon date, is recognized as unrealized gain (loss). The amount paid
to the swap counterparty representing capital depreciation on the
underlying securities and accrued interest expense and interest income is
recorded as net realized gain (loss). The Fund may be exposed to credit
risk in the event of non-performance by the swap counterparty; however,
the Fund does not anticipate non-performance by the counterparty. The Fund
may segregate certain short-term investments as collateral for the
notional amount and payment of liabilities under the equity swap
agreement.
Investment in international markets: Investing in international markets
may involve special risks and considerations not typically associated with
investing in the United States markets. These risks include revaluation of
currencies, high rates of inflation, repatriation, restrictions on income
and capital, and future adverse political and economic developments.
Moreover, securities issued in these markets may be less liquid, subject
to government ownership controls, delayed settlements, and their prices
more volatile than those of comparable securities in the United States.
3. Securities Transactions
Investment transactions: For the year ended August 31, 1999, purchases and
sales of investment securities, excluding short-term investments and
futures contracts, aggregated to $63,042,157 and $56,547,319,
respectively.
Futures transactions: The Fund's transactions in futures contracts for the
year ended August 31, 1999 were as follows:
Futures Contracts
---------------------------
Aggregate
Number of Face Value of
Contracts Contracts (1)
--------- -------------
Outstanding at August 31, 1998 -- $ --
Contracts opened 59 3,868,136
Contracts closed (59) (3,868,136)
--------- -------------
Outstanding at August 31, 1999 -- $ --
========= =============
(1) The aggregate face value of contracts is computed on the date each
contract was opened.
Annual Report 27
<PAGE>
SSgA
Active International Fund
Notes to Financial Statements, continued
August 31, 1999
Securities Lending: Effective December 17, 1998, the Investment Company
started its securities lending program. The program allows each Fund to
loan securities with a value up to 33 1/3% of its total assets to certain
brokers. The Fund receives cash (U.S. currency), U.S. Government or U.S.
Government agency obligations as collateral against the loaned securities.
To the extent that a loan is secured by cash collateral, such collateral
shall be invested by State Street Bank and Trust Company in short-term
instruments, money market mutual funds, and such other short-term
investments, provided the investments meet certain quality and
diversification requirements. Under the securities lending arrangement,
the collateral received is recorded on the Fund's statement of assets and
liabilities along with the related obligation to return the collateral. In
those situations where the Company has relinquished control of securities
transferred, it derecognizes the securities and records a receivable from
the counterparty.
Income generated from the investment of cash collateral, less negotiated
rebate fees paid to participating brokers and transaction costs, is
divided between the Fund and State Street Bank and Trust Company and is
recorded as interest income for the Fund. To the extent that a loan is
secured by non-cash collateral, brokers pay the Fund negotiated lenders'
fees, which are divided between the Fund and State Street Bank and Trust
Company and are recorded as interest income for the Fund. All collateral
received will be in an amount at least equal to 102% (for loans of U.S.
securities) or 105% (for non-U.S. securities) of the market value of the
loaned securities at the inception of each loan. Should the borrower of
the securities fail financially, there is a risk of delay in recovery of
the securities or loss of rights in the collateral. Consequently, loans
are made only to borrowers which are deemed to be of good financial
standing. As of August 31, 1999, the value of outstanding securities on
loan and the value of collateral amounted to $12,075,043 and $12,790,513,
respectively. The Fund recorded securities lending income of $59,227
during the year.
4. Related Parties
Adviser: The Investment Company has an investment advisory agreement with
State Street Bank and Trust Company (the "Adviser") under which the
Adviser directs the investments of the Fund in accordance with its
investment objectives, policies, and limitations. For these services, the
Fund pays a fee to the Adviser, calculated daily and paid monthly, at the
annual rate of .75% of its average daily net assets. The Adviser
voluntarily agreed to waive up to the full amount of its advisory fee to
the extent that total expenses exceeded 1.00% of its average daily net
assets on an annual basis. The Investment Company also has contracts with
the Adviser to provide custody, shareholder servicing and transfer agent
services to the Fund. These amounts are presented in the accompanying
Statement of Operations.
In addition, the Fund has entered into arrangements with its Adviser
whereby credits realized as a result of uninvested cash balances were used
to reduce a portion of the Fund's expenses. During the period, the Fund's
custodian fees were reduced by $4,181 under these arrangements.
Administrator: The Investment Company has an administration agreement with
Frank Russell Investment Management Company (the "Administrator"), a
wholly owned subsidiary of The Northwestern Mutual Life Insurance Company,
under which the Administrator supervises all non-portfolio investment
aspects of the Investment Company's operations and provides adequate
office space and all necessary office equipment and services, including
telephone service, utilities, stationery supplies, and similar items. The
Investment Company pays the Administrator the following fees for services
supplied by the Administrator pursuant to the Administration Agreement:
(i) an annual fee, payable monthly on a pro rata basis, based on the
following
28 Annual Report
<PAGE>
SSgA
Active International Fund
Notes to Financial Statements, continued
August 31, 1999
percentages of the average daily net assets of all international funds: $0
up to and including $500 million - .07%, over $500 million to and
including $1 billion - .06%, over $1 billion to and including $1.5 billion
- .04%, over $1.5 billion - .03%, and (ii) less an amount equal to the sum
of certain distribution-related expenses incurred by the Investment
Company's Distributor on behalf of the Fund (up to a maximum of 10% for
the period September 1, 1997 to December 31, 1997 up to a maximum of 5%
for the period January 1, 1998 to December 31, 1998 and 0% thereafter, of
the asset-based fee determined in (i)). In addition, the Fund reimburses
the Administrator for out-of-pocket expenses and start-up costs for new
funds.
Distributor and Shareholder Servicing: The Investment Company has a
Distribution Agreement with Russell Fund Distributors (the "Distributor")
which is a wholly-owned subsidiary of the Administrator to promote and
offer shares of the Investment Company. The Distributor may enter into
sub-distribution agreements with other non-related parties. The amounts
paid to the Distributor are included in the accompanying Statement of
Operations.
The Investment Company has a Distribution Plan pursuant to Rule 12b-1 (the
"Plan") under the 1940 Act. Under this Plan, the Investment Company is
authorized to make payments to the Distributor, or any Shareholder
Servicing Agent, as defined in the Plan, for providing distribution and
marketing services, for furnishing assistance to investors on an ongoing
basis, and for the reimbursement of direct out-of-pocket expenses incurred
by the Distributor in connection with the distribution and marketing of
shares of the Investment Company and the servicing of investor accounts.
The Fund has service agreements with the Adviser, State Street Brokerage
Services, Inc. ("SSBSI"), a wholly- owned subsidiary of the Adviser, the
Adviser's Retirement Investment Services Division ("RIS"), the Adviser's
Metropolitan Division of Commercial Banking ("Commercial Banking") and
State Street Solutions ("Solutions")(collectively the "Agents"), as well
as several unaffiliated service providers. For these services, the Fund
pays .025%, .175%, .175%, .175% and .175%, to the Adviser, SSBSI, RIS,
Commercial Banking, and Solutions, respectively, based upon the average
daily value of all Fund shares held by or for customers of these Agents.
For the year ended August 31, 1999, the Fund was charged shareholder
servicing expenses of $17,538, $1,339, $267, $391 and $7,139, by the
Adviser, SSBSI, RIS, Commercial Banking, and Solutions, respectively.
The combined distribution and shareholder servicing payments shall not
exceed .25% of the average daily value of net assets on an annual basis.
The shareholder servicing payments shall not exceed .20% of the average
daily value of net assets on an annual basis. Any payments that exceed the
maximum amount of allowable reimbursement may be carried forward for two
years following the year in which the expenditure was incurred so long as
the plan is in effect. The Fund's responsibility for any such expenses
carried forward shall terminate at the end of two years following the year
in which the expenditure was incurred. The Trustees or a majority of the
Fund's shareholders have the right, however, to terminate the Distribution
Plan and all payments thereunder at any time. The Fund will not be
obligated to reimburse the Distributor for carryover expenses subsequent
to the Distribution Plan's termination or noncontinuance. There were no
carryover expenses as of August 31, 1999.
Annual Report 29
<PAGE>
SSgA
Active International Fund
Notes to Financial Statements, continued
August 31, 1999
Board of Trustees: Through May 31, 1999, the Investment Company paid each
Trustee not affiliated with the Investment Company a retainer of $48,000
annually, $1,500 for each board meeting attended, an additional $1,500 for
attending the annual audit committee meeting, and reimbursement for
out-of-pocket expenses. As of June 1, 1999, each Trustee receives $2,500
for each board meeting attended, an additional $2,500 for attending the
annual audit committee meeting and $2,500 for the valuation committee fee
in addition to the $48,000 annual retainer. These expenses are allocated
among all of the Funds based upon their relative net assets.
Accrued fees payable to affiliates and trustees as of August 31, 1999 were
as follows:
Advisory fees $ 71,709
Administration fees 5,950
Custodian fees 56,872
Distribution fees 1,786
Shareholder servicing fees 7,555
Transfer agent fees 10,397
Trustees' fees 240
----------
$ 154,509
==========
Beneficial Interest: As of August 31, 1999, two shareholders (who are also
other series of the Investment Company) were record owners of
approximately 13% and 12%, respectively, of the total outstanding shares
of the Fund.
5. Fund Share Transactions (amounts in thousands)
<TABLE>
<CAPTION>
Fiscal Years Ended August 31,
--------------------------------------------------------
1999 1998
-------------------------- --------------------------
Shares Dollars Shares Dollars
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Proceeds from shares sold .................... 8,857 $ 81,077 15,836 $ 153,450
Proceeds from reinvestment of distributions .. 879 7,304 405 4,150
Payments for shares redeemed ................. (8,387) (78,581) (15,685) (164,823)
----------- ----------- ----------- -----------
Total net increase (decrease) ................ 1,349 $ 9,800 556 $ (7,223)
=========== =========== =========== ===========
</TABLE>
6. Line of Credit
The Fund and several affiliated Funds (the "Participants") share in a $50
million revolving credit facility for temporary or emergency purposes,
including the meeting of redemption requests that otherwise might require
the untimely disposition of securities. The Participants are charged an
annual commitment fee of .09% (.065% prior to July 15, 1999) on the
average daily unused amount of the aggregate commitment, which is
allocated among each of the Participants. Interest, at the Federal Fund
Rate plus .50% annually, is calculated based on the market rates at the
time of the borrowing. The Fund may borrow up to a maximum of 33 1/3
percent of the value of its net assets under the agreement. The Fund did
not have any drawdowns during the year.
30 Annual Report
<PAGE>
SSgA
Active International Fund
Tax Information
August 31, 1999 (Unaudited)
The Fund paid distributions of $38,129 from net long-term capital gains during
its taxable year ended August 31, 1999.
The Fund paid foreign taxes of $276,075 and recognized $2,356,024 of foreign
source income during the taxable year ended August 31, 1999. Pursuant to Section
853 of the Internal Revenue Code, the Fund designates $.0286 per share of
foreign taxes paid and $.2444 of gross income earned from foreign sources in the
taxable year ended August 31, 1999.
Please consult a tax advisor for questions about federal or state income tax
laws.
Annual Report 31
<PAGE>
SSgA Active International Fund
One International Place, 27th Floor
Boston, Massachusetts 02110
(800) 997-7327
- --------------------------------------------------------------------------------
Trustees
Lynn L. Anderson, Chairman
William L. Marshall
Steven J. Mastrovich
Patrick J. Riley
Richard D. Shirk
Bruce D. Taber
Henry W. Todd
Officers
Lynn L. Anderson, President, Treasurer and CEO
Mark E. Swanson, Assistant Secretary, Assistant
Treasurer and Principal Accounting Officer
J. David Griswold, Vice President and Secretary
Deedra S. Walkey, Assistant Secretary
Rick J. Chase, Assistant Secretary
Carla L. Anderson, Assistant Secretary
Investment Adviser
State Street Bank and Trust Company
225 Franklin Street
Boston, Massachusetts 02110
Custodian, Transfer Agent and
Office of Shareholder Inquiries
State Street Bank and Trust Company
1776 Heritage Drive
North Quincy, Massachusetts 02171
(800) 647-7327
Distributor
Russell Fund Distributors, Inc.
One International Place, 27th Floor
Boston, Massachusetts 02110
(800) 997-7327
Administrator
Frank Russell Investment Management Company
909 A Street
Tacoma, Washington 98402
Legal Counsel
Goodwin, Procter & Hoar LLP
Exchange Place
Boston, Massachusetts 02109
Independent Accountants
PricewaterhouseCoopers LLP
160 Federal Street
Boston, Massachusetts 02110
32 Annual Report
<PAGE>
SSgA(R) Funds
Tax Free Money Market Fund
Annual Report
August 31, 1999
Table of Contents
Page
Chairman's Letter............................................. 4
Portfolio Management Discussion and Analysis.................. 6
Report of Independent Accountants............................. 8
Financial Statements.......................................... 9
Financial Highlights.......................................... 21
Notes to Financial Statements................................. 22
Fund Management and Service Providers......................... 26
"SSgA(R)" is a registered trademark of State Street Corporation and is licensed
for use by the SSgA Funds.
This report is prepared from the books and records of the Fund and it is
submitted for the general information of shareholders. This information is for
distribution to prospective investors only when preceded or accompanied by a
SSgA Funds Prospectus containing more complete information concerning the
investment objective and operations of the Fund, charges and expenses. The
Prospectus should be read carefully before an investment is made.
Performance is historical and assumes reinvestment of all dividends and capital
gains. Investment return and principal value will fluctuate so that an
investor's shares, when redeemed, may be worth more or less than when purchased.
Past performance is not indicative of future results. An investment in a money
market fund is neither insured nor guaranteed by the US government. There can be
no assurance that a money market fund will be able to maintain a stable net
asset value of $1.00 per share. Income from tax-free funds may be subject to an
alternative minimum tax, or state and local taxes. Russell Fund Distributors,
Inc., is the distributor of the SSgA Funds.
<PAGE>
SSgA Tax Free Money Market Fund
- --------------------------------------------------------------------------------
Letter From the Chairman of State Street Global Advisors
- --------------------------------------------------------------------------------
Dear Shareholders,
It is my pleasure to provide you with the SSgA Funds annual report for the
fiscal year ended August 31, 1999. The SSgA Fund family has grown to include
twenty-three portfolios covering a broad range of investment strategies. The
enclosed information provides an overview of the investment process for the SSgA
Tax Free Money Market Fund. This overview contains market updates, performance,
and financial information for the Fund. I hope you will find this information a
useful reference as you review your investment strategy.
During the past fiscal year, the SSgA Fund family has opened two new Funds. The
names and investment objectives for these funds are as follows:
The SSgA Aggressive Equity Fund seeks to maximize total return through investing
in US equity securities that are undervalued relative to their growth potential
as measured by SSgA's proprietary models.
The SSgA IAM Shares Fund seeks to maximize total return by investing primarily
in equity securities of companies that have entered into collective bargaining
agreements with the International Association of Machinists and Aerospace
Workers or affiliated labor unions.
Additionally, three SSgA Funds achieved a five-year track record during the 1999
fiscal year. These funds include the two institutional money market funds, SSgA
US Treasury and SSgA Prime Money Market Funds and the SSgA Emerging Markets
Fund. We are proud of our long-term record and look forward to having additional
funds complete their five-year anniversary.
In today's complex global marketplace, we are continually researching new
products and ideas to introduce to our fund family. Here at SSgA, we are
committed to providing a wide range of competitive investment vehicles to
fulfill your investment needs.
I would like to thank you for choosing the SSgA Funds.
Sincerely,
/s/ Nicholas A. Lopardo
Nicholas A. Lopardo
State Street Global Advisors
Chairman and Chief Executive Officer
4 Annual Report
<PAGE>
SSgA Tax Free Money Market Fund
- --------------------------------------------------------------------------------
Management of the Funds
- --------------------------------------------------------------------------------
[PHOTO]
Nicholas A. Lopardo
Chairman and Chief Executive Officer
A Team Approach to Investment Management
Our investment strategies are the product of the combined experience of our
professional staff. Portfolio Managers work together to develop and enhance the
techniques that drive our investment processes. As a result, the portfolios we
manage benefit from the knowledge of the entire team.
Mr. James Donahue, Vice President, has been the portfolio manager primarily
responsible for investment decisions regarding the SSgA Tax Free Money Market
Fund since its inception in December 1994. Prior to that he was a municipal bond
trader with the investment firm of Jesup Josephthal. He is a graduate of Belknap
College with a BS in economics. There are two other portfolio managers working
with Mr. Donahue.
Annual Report 5
<PAGE>
SSgA Tax Free Money Market Fund
- --------------------------------------------------------------------------------
Portfolio Management Discussion and Analysis
- --------------------------------------------------------------------------------
Objective: Maximize current income exempt from federal income taxes;
preservation of capital and liquidity.
Invests in: High quality, short-term municipal securities.
Strategy: Fund Managers base their decisions on the relative attractiveness of
different tax-exempt money market investments which can vary depending on the
general level of interest rates as well as supply/demand imbalances in the
market.
- --------------------------------------------------------------------------------
GROWTH OF A $10,000 INVESTMENT
Dates Tax Free Money Market Fund
Inception* $10,000
1995 $10,254
1996 $10,568
1997 $10,884
1998 $11,219
1999 $11,523
================================================================================
Performance Review
For the fiscal year ended August 31, 1999, the SSgA Tax Free Money Market Fund
had a return of 2.71%. The Fund's annualized return was 3.03% since its
inception in December 1994.
The Fund maintains a AA rating from the Standard & Poor's Corporation. Standard
& Poor's assigns a AA rating to funds where safety of principal value is high
and exposure to loss is limited. This rating corresponds with the underlying
investments and the management style of the Funds. From the Fund's inception,
the investment objective has been preservations of principal and a stable net
asset value of $1.00 per share, with a competitive rate of return. The rating of
mutual funds are opinions of the investment quality of shares
- --------------------------------------------------------------------------------
SSgA Tax Free Money Market Fund
- --------------------------------------------------------------------------------
Period Ended Growth of Total
08/31/99 $10,000 Return
- -------------- ------------ -------
1 Year $ 10,271 2.71%
Inception $ 11,523 3.03%+
* The Fund commenced operations on December 1, 1994.
+ Annualized.
6 Annual Report
<PAGE>
SSgA Tax Free Money Market Fund
- --------------------------------------------------------------------------------
Portfolio Management Discussion and Analysis
- --------------------------------------------------------------------------------
of the mutual fund which invest in short-term fixed income obligations. The
Standard & Poor's Corporation assigns ratings across a wide spectrum of
comparable funds. In order to maintain the Fund's rating, S&P requires
investment guidelines that may, in certain instances, be more conservative than
otherwise allowed a fund under applicable law.
Market and Portfolio Highlights
During the first two quarters of fiscal 1999, the Fed eased interest rates on
three different occasions. The inflation rate remained low, and as a result, the
economy continued it's unprecedented growth. However, during the last quarter of
the fiscal year, the Fed raised rates consistent with their overall bias on
continuing a tightening mode.
With more and more financing being done on a variable rate basis, the tax-exempt
market is experiencing a diminishing supply of fixed rate securities. The yield
curve has remained flat for the past two years, and as a result, the Fund
continued to adhere to the strategy of remaining in a short duration. At the
point in time that the yield curve begins to steepen, the Fund will have the
flexibility to take advantage of higher rates and extend the average duration.
Currently, at August 31, 1999, the Fund's duration is at 28 days. The Fund will
continue to invest only in the highest quality investments in order to attain
its objective.
- --------------------------------------------------------------------------------
Top Ten Issuers
(as a percent of Total Investments) August 31, 1999
- --------------------------------------------------------------------------------
Kentucky Economic Development Finance Authority Revenue
Pooled Hospital Loan 4.6%
Missouri State Health & Educational Facilities Authority 4.0
Cobb County, Georgia Tax Anticipation Notes 3.8
Iowa Finance Hospital Facility Revenue, Series B 3.8
Salt Lake City, Utah Revenue, Series A 3.8
Dauphin County, Pennsylvania, General Obligation Series B 3.6
San Antonio, Texas Water Revenue Series SGA42 3.5
Franklin County, Ohio Hospital Revenue 3.5
Massachusetts, State of, Health & Educational Facilities
Authority Revenue 3.0
Roanoke, Virginia, Industrial Development Authority Hospital
Revenue, Series A 2.3
- --------------------------------------------------------------------------------
---------------------
Performance is historical and assumes reinvestment of all dividends and capital
gains. Investment return and principal value will fluctuate so that an
investor's shares, when redeemed, may be worth more or less than when purchased.
Past performance is not indicative of future results.
An investment in a money market fund is neither insured nor guaranteed by the US
Government. There can be no assurance that a money market fund will be able to
maintain a stable net asset value of $1.00 per share.
Annual Report 7
<PAGE>
Report of Independent Accountants
To the Shareholders and Board of Trustees
of the SSgA Funds:
In our opinion, the accompanying statement of assets and liabilities and
statement of net assets, and the related statements of operations and of changes
in net assets and the financial highlights present fairly, in all material
respects, the financial position of SSgA Tax Free Money Market Fund (the "Fund")
at August 31, 1999, the results of its operations for the fiscal year then ended
and the changes in its net assets for each of the two fiscal years in the period
then ended, and the financial highlights for each of the four fiscal years in
the period then ended, and for the period December 1, 1994 (commencement of
operations) to August 31, 1995, in conformity with generally accepted accounting
principles. These financial statements and financial highlights (hereafter
referred to as "financial statements") are the responsibility of the Fund's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these financial
statements in accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of securities at August 31, 1999 by correspondence with the
custodian, provide a reasonable basis for the opinion expressed above.
Boston, Massachusetts
October 11, 1999
/s/ PricewaterhouseCoopers LLP
8 Annual Report
<PAGE>
SSgA
Tax Free Money Market Fund
Statement of Net Assets
August 31, 1999
<TABLE>
<CAPTION>
Principal
Amount Date Value
(000) Rate of (000)
$ % Maturity* $
--------- ------ --------- -----
<S> <C> <C> <C> <C>
Municipal Bonds - 99.7%
Alabama - 4.9%
Montgomery, Alabama Special Care Facilities Financing Authority Revenue
Series A, weekly demand (a) 1,000 3.350(2) 12/01/30 1,000
Montgomery, Alabama Special Care Facilities Financing Authority Revenue
Series H, weekly demand (a) 3,095 3.350(2) 12/01/30 3,095
Stevenson, Alabama Industrial Development Board Environmental Improvement
Revenue Series A, daily demand (a) 5,000 3.050(1) 02/01/34 5,000
University of Alabama Revenue Series A, weekly demand 3,800 3.150(2) 10/01/07 3,800
-------
12,895
-------
Alaska - 1.3%
Alaska Industrial Deveopment & Export Authority Revenue Lot 5,
weekly demand 2,100 3.550(2) 07/01/03 2,100
Alaska Industrial Deveopment & Export Authority Revenue Lot 6,
weekly demand 1,420 3.550(2) 07/01/01 1,420
-------
3,520
-------
Arizona - 0.5%
Phoenix, Arizona Civic Improvement Corporation Water System Revenue 1,215 6.000 07/01/00 1,239
-------
Arkansas - 1.2%
Arkansas, State of, Development Financial Authority Health Care Facilities
Revenue Series B, weekly demand 3,100 3.250(2) 06/01/12 3,100
-------
California - 1.1%
California Higher Education Loan Authority Incorporated Student Loan Revenue
Series D-2, semiannual demand 3,000 3.500(4) 04/01/00 3,000
-------
Colorado - 0.4%
Colorado Springs, Colorado General Obligation (pre-refunded 09/01/99)(b) 1,000 7.000 09/01/07 1,000
-------
Connecticut - 1.0%
Connecticut State Health & Educational Facilities Authority Revenue Series T-2,
weekly demand 2,500 3.150(2) 07/01/29 2,500
-------
</TABLE>
Annual Report 9
<PAGE>
SSgA
Tax Free Money Market Fund
Statement of Net Assets, continued
August 31, 1999
<TABLE>
<CAPTION>
Principal
Amount Date Value
(000) Rate of (000)
$ % Maturity* $
--------- ------ --------- -----
<S> <C> <C> <C> <C>
Delaware - 0.5%
Delaware, State of, Economic Development Authority Solid Waste Disposal &
Sewage Facilities Revenue Series A, daily demand (a) 1,400 3.050(1) 07/01/28 1,400
-------
District of Columbia - 0.7%
District of Columbia Revenue, weekly demand (a) 1,900 3.300(2) 10/01/15 1,900
-------
Florida - 6.4%
Broward County, Florida Professional Sports Facilities Tax Revenue
Series SGA 38, weekly demand (a) 5,000 3.330(2) 09/01/21 5,000
Dade County, Florida Industrial Development Authority Revenue Series A,
weekly demand 450 3.250(2) 01/01/16 450
Dade County, Florida Industrial Development Authority Revenue Series B,
weekly demand 900 3.250(2) 01/01/16 900
Dade County, Florida Industrial Development Authority Revenue Series C,
weekly demand 500 3.250(2) 01/01/16 500
Dade County, Florida Industrial Development Authority Revenue Series D,
weekly demand 100 3.250(2) 01/01/16 100
Hillsborough County, Florida Aviation Authority Revenue Series A
(pre-refunded 10/01/99)(a)(b) 1,000 6.850 10/01/06 1,023
Jacksonville, Florida Electric Authority Revenue Series SGA17,
weekly demand 2,000 3.330(2) 10/01/20 2,000
Jacksonville, Florida Excise Taxes Revenue Series A
(pre-refunded 10/01/99)(a)(b) 1,200 6.500 10/01/11 1,227
Putnam County, Florida Development Authority Pollution Control Revenue
Series H-4, semiannual demand 2,920 3.000(4) 03/15/14 2,920
St. Lucie County, Florida Pollution Control Revenue, daily demand 2,500 2.850(1) 01/01/26 2,500
-------
16,620
-------
Georgia - 8.8%
Burke County, Georgia Development Authority Pollution Control Revenue,
daily demand 3,000 3.000(1) 09/01/26 3,000
Clayton County, Georgia Housing Authority Multifamily Housing Revenue
Series A, weekly demand 2,315 3.300(2) 01/01/21 2,315
Clayton County, Georgia Housing Authority Multifamily Housing Revenue
Series D, weekly demand 2,200 3.300(2) 01/01/21 2,200
Cherokee County, Georgia School System General Obligation 1,500 5.000 02/01/00 1,512
</TABLE>
10 Annual Report
<PAGE>
SSgA
Tax Free Money Market Fund
Statement of Net Assets, continued
August 31, 1999
<TABLE>
<CAPTION>
Principal
Amount Date Value
(000) Rate of (000)
$ % Maturity* $
--------- ------ --------- -----
<S> <C> <C> <C> <C>
Cobb County, Georgia Tax Anticipation Notes 10,000 3.250 12/31/99 10,007
Georgia Municipal Gas Authority Revenue Series A, weekly demand 4,000 3.550(2) 11/01/06 4,000
-------
23,034
-------
Illinois - 1.4%
Illinois Development Finance Authority Revenue, weekly demand 3,000 3.300(2) 11/15/11 3,000
Illinois Finance Authority Economic Development Revenue, weekly demand 700 3.450(2) 12/01/09 700
-------
3,700
-------
Indiana - 1.2%
Indianapolis, Indiana Local Public Improvement Bond Bank Notes Series C 3,250 4.000 01/10/00 3,259
-------
Iowa - 4.8%
Des Moines, Iowa Commercial Development Revenue, monthly demand 2,700 3.400(3) 04/01/15 2,700
Iowa Finance Authority Hospital Facility Revenue Series B, weekly demand (a) 10,000 3.250(2) 01/01/28 10,000
-------
12,700
-------
Kansas - 0.2%
Seward County, Kansas Sales Tax Revenue (a) 485 4.250 12/01/99 486
-------
Kentucky - 4.6%
Kentucky Economic Development Finance Authority Revenue Pooled Hospital
Loan, weekly demand 12,000 3.400(2) 08/01/18 12,000
-------
Louisiana - 0.3%
Ascension Parish, Louisiana Pollution Control Revenue, weekly demand 700 3.300(2) 12/01/09 700
-------
Maryland - 1.9%
Maryland, State of, Health & Higher Educational Facilities Authority Revenue
Series A, weekly demand 4,000 3.300(2) 04/01/35 4,000
Washington Suburban Sanitation District General Obligation
(pre-refunded 12/01/99) (b) 1,020 6.500 12/01/11 1,049
-------
5,049
-------
</TABLE>
Annual Report 11
<PAGE>
SSgA
Tax Free Money Market Fund
Statement of Net Assets, continued
August 31, 1999
<TABLE>
<CAPTION>
Principal
Amount Date Value
(000) Rate of (000)
$ % Maturity* $
--------- ------ --------- -----
<S> <C> <C> <C> <C>
Massachusetts - 3.0%
Massachusetts, State of, Health & Educational Facilities Authority Revenue
Series D, weekly demand 1,000 3.150(2) 10/01/27 1,000
Massachusetts, State of, Health & Educational Facilities Authority Revenue
Series G-1, weekly demand (a) 1,000 2.900(2) 01/01/19 1,000
Massachusetts, State of, Health & Educational Facilities Authority Revenue
Series P-1, weekly demand 800 3.150(2) 07/01/27 800
Massachusetts, State of, Health & Educational Facilities Authority Revenue
Series P-2, weekly demand 5,000 3.150(2) 07/01/27 5,000
-------
7,800
-------
Michigan - 1.5%
Michigan Municipal Bond Authority Revenue Series B-2 2,000 4.250 08/25/00 2,013
Michigan, State of, Trunk Line Series B (a) 1,995 4.700 11/15/99 2,001
-------
4,014
-------
Missouri - 4.8%
Kansas City, Missouri Industrial Development Authority Multifamily Housing
Revenue, monthly demand 2,220 3.400(3) 12/01/15 2,220
Missouri, State of, Health & Educational Facilities Authority Revenue Series A,
weekly demand 1,900 3.150(2) 09/01/10 1,900
Missouri, State of, Health & Educational Facilities Authority Revenue Series A,
weekly demand 1,000 3.250(2) 12/01/19 1,000
Missouri, State of, Health & Educational Facilities Authority Revenue Series B,
weekly demand 1,100 3.250(2) 06/01/14 1,100
Missouri, State of, Health & Educational Facilities Authority Revenue Series B,
weekly demand 1,000 3.250(2) 12/01/16 1,000
Missouri, State of, Health & Educational Facilities Authority Revenue Series C,
weekly demand 3,200 3.250(2) 06/01/19 3,200
Missouri, State of, Health & Educational Facilities Authority Revenue Series C,
weekly demand 1,200 3.250(2) 12/01/19 1,200
Missouri, State of, Health & Educational Facilities Authority Revenue Series D,
weekly demand 1,000 3.250(2) 06/01/19 1,000
-------
12,620
-------
</TABLE>
12 Annual Report
<PAGE>
SSgA
Tax Free Money Market Fund
Statement of Net Assets, continued
August 31, 1999
<TABLE>
<CAPTION>
Principal
Amount Date Value
(000) Rate of (000)
$ % Maturity* $
--------- ------ --------- -----
<S> <C> <C> <C> <C>
Nebraska - 2.2%
Lancaster County, Nebraska Hospital Authority Number 1 Hospital Revenue,
weekly demand (a) 5,900 3.200(2) 06/01/12 5,900
-------
Nevada - 0.4%
Nevada Housing Division Revenue, weekly demand 700 3.400(2) 10/01/27 700
Nevada Housing Division Revenue Series E, weekly demand 400 3.400(2) 10/01/30 400
-------
1,100
-------
New Jersey - 0.4%
New Jersey Economic Development Authority Pollution Control Revenue
Series A, weekly demand (a) 1,000 2.750(2) 03/01/12 1,000
-------
New York - 7.6%
Hempstead, New York Industrial Development Agency Industrial Development
Revenue, weekly demand 1,900 3.150(2) 09/15/15 1,900
New York, New York General Obligation Series A-9, weekly demand 2,550 3.200(2) 08/01/18 2,550
New York, New York General Obligation Series B, weekly demand 500 3.150(2) 08/15/24 500
New York, New York General Obligation Series D, weekly demand (a) 2,600 3.150(2) 02/01/21 2,600
New York, New York Municipal Trust Series SGB 36, weekly demand (a) 3,600 3.250(2) 06/01/22 3,600
New York, New York Transitional Finance Authority Revenue Series A-2,
weekly demand 3,100 3.150(2) 11/15/22 3,100
New York, State of, Energy Research and Development Authority Pollution
Control Revenue Series B, weekly demand (a) 5,715 3.150(2) 08/01/32 5,715
-------
19,965
-------
North Carolina - 1.1%
Charlotte, North Carolina Airport Revenue Series A, weekly demand (a) 800 3.200(2) 07/01/16 800
University of North Carolina School of Medicine Ambulatory Care Clinic
Revenue, weekly demand 2,100 3.350(2) 07/01/12 2,100
-------
2,900
-------
Ohio - 4.3%
Clermont County, Ohio Hospital Facilities Revenue Series B, weekly demand 880 3.400(2) 09/01/21 880
Cuyahoga County, Ohio Hospital Revenue Series D, daily demand 1,300 3.000(1) 01/01/26 1,300
Franklin County, Ohio Hospital Revenue, weekly demand 9,100 3.200(2) 06/01/16 9,100
-------
11,280
-------
</TABLE>
Annual Report 13
<PAGE>
SSgA
Tax Free Money Market Fund
Statement of Net Assets, continued
August 31, 1999
<TABLE>
<CAPTION>
Principal
Amount Date Value
(000) Rate of (000)
$ % Maturity* $
--------- ------ --------- -----
<S> <C> <C> <C> <C>
Oklahoma - 1.9%
Muskogee, Oklahoma Industrial Trust Pollution Control Revenue Series A,
weekly demand 5,000 3.470(2) 01/01/25 5,000
-------
Pennsylvania - 5.5%
Dauphin County, Pennsylvania General Obligation Series B, weekly demand 9,500 3.350(2) 10/01/27 9,500
Langhorne Manor Borough, Pennsylvania Higher Education & Health Authority
Revenue (pre-refunded 11/15/99)(b) 1,000 8.750 11/15/14 1,031
Philadelphia, Pennsylvania Hospitals & Higher Education Facilities Authority
Hospital Revenue, daily demand 1,100 3.000(1) 03/01/27 1,100
Philadelphia, Pennsylvania Hospitals & Higher Education Facilities Authority
Hospital Revenue Series A, daily demand 2,800 3.000(1) 03/01/27 2,800
-------
14,431
-------
South Carolina - 1.2%
Florence County, South Carolina Public Facilities Corporation Certificate
Participation (pre-refunded 03/01/00) (a)(b) 1,000 7.600 03/01/10 1,031
South Carolina, State of, Budget & Control Board State Facilities
Lease Revenue (a) 2,015 5.000 02/01/00 2,030
-------
3,061
-------
Tennessee - 2.2%
Knox County, Tennessee Health Education & Housing Facilities Board Hospital
Facilities Series B, weekly demand 2,800 3.400(2) 09/01/14 2,800
Memphis, Tennessee General Obligation Series B, weekly demand 2,000 3.400(2) 08/01/07 2,000
Metropolitan Government Nashville and Davidson County, Tennessee General
Obligation (pre-refunded 12/01/99)(b) 1,000 6.200 12/01/09 1,028
-------
5,828
-------
Texas - 8.4%
Dallas-Fort Worth, Texas Regional Airport Revenue Series SGA 49,
daily demand (a) 1,855 3.100(1) 11/01/23 1,855
Harris County, Texas General Obligation Series A 500 6.000 08/15/00 511
Harris County, Texas Industrial Development Corporation Revenue,
daily demand 1,700 2.850(1) 04/01/27 1,700
</TABLE>
14 Annual Report
<PAGE>
SSgA
Tax Free Money Market Fund
Statement of Net Assets, continued
August 31, 1999
<TABLE>
<CAPTION>
Principal
Amount Date Value
(000) Rate of (000)
$ % Maturity* $
--------- ------ --------- -----
<S> <C> <C> <C> <C>
Lower Neches Valley, Texas Authority Revenue, semiannual demand 1,000 3.450(4) 02/15/17 1,000
North Texas Municipal Water District Regulated Wastewater Revenue
(pre-refunded 06/01/00)(a)(b) 2,915 7.050 06/01/02 2,988
Panhandle Plains, Texas Higher Education Authority Revenue Series A,
weekly demand 1,500 3.300(2) 06/01/21 1,500
San Antonio, Texas Water Revenue Series SGA 42, weekly demand 9,115 3.330(2) 05/15/26 9,115
Texas A&M University Revenue, weekly demand (a) 3,330 3.330(2) 05/15/16 3,330
-------
21,999
-------
Utah - 7.8%
Intermountain Power Agency Utah Power Supply Revenue Series E, semiannual
demand (a) 2,000 3.100(4) 07/01/14 2,000
Provo City, Utah Energy System Revenue Series A (pre-refunded
11/01/99)(a)(b) 4,000 7.625 11/01/12 4,027
Salt Lake City, Utah Revenue Series A, weekly demand 9,950 3.250(2) 01/01/20 9,950
Utah County, Utah Environmental Improvement Revenue, semiannual demand 4,500 3.100(4) 11/01/17 4,500
-------
20,477
-------
Virginia - 2.7%
Roanoke, Virginia Industrial Development Authority Hospital Revenue
Series A, daily demand 6,000 3.000(1) 07/01/27 6,000
Virginia, State of, Public School Authority Series A 1,000 6.000 01/01/00 1,009
-------
7,009
-------
Washington - 1.4%
Kent, Washington General Obligation Series SGA 27, weekly demand (a) 1,200 3.330(2) 12/01/16 1,200
Port of Kalama, Washington Public Corporation Port, weekly demand 985 3.300(2) 01/01/04 985
Port of Tacoma, Washington Revenue Series A (a) 1,000 5.000 11/01/99 1,003
Washington, State of, Health Care Facilities Authority Revenue (a) 545 3.000 09/01/99 544
-------
3,732
-------
</TABLE>
Annual Report 15
<PAGE>
SSgA
Tax Free Money Market Fund
Statement of Net Assets, continued
August 31, 1999
<TABLE>
<CAPTION>
Principal
Amount Date Value
(000) Rate of (000)
$ % Maturity* $
--------- ------ --------- -----
<S> <C> <C> <C> <C>
Wisconsin - 2.1%
Racine, Wisconsin General Obligation Series B 1,000 3.700 12/01/99 1,000
University of Wisconsin Hospitals & Clinics Authority Revenue,
weekly demand (a) 4,400 3.250(2) 04/01/26 4,400
-------
5,400
-------
Total Investments - 99.7% (amortized cost $261,618)(c) ............................................ 261,618
Other Assets and Liabilities, Net - 0.3% .......................................................... 775
-------
Net Assets - 100.0% ............................................................................... 262,393
=======
</TABLE>
(a) Bond is insured by AMBAC, FGIC, or MBIA/BIG.
(b) Pre-refunded: These bonds are collateralized by U.S. Government
Obligations, which are held in escrow by a trustee and are used to pay
principal and interest on the tax-exempt issue and to retire the bonds in
full at the earliest refunding date. The rate noted is for descriptive
purposes; effective yield may vary.
(c) The cost for federal income tax purposes is the same as shown above.
* All securities with a maturity greater than thirteen months have a demand
feature, or an optional or mandatory put, or are pre-refunded, resulting
in an effective maturity of thirteen months or less. Additionally, all
daily and weekly demand securities are backed by direct payment letters of
credit.
Variable Rate:
(1) Daily
(2) Weekly
(3) Monthly
(4) Semiannual
See the accompanying notes which are an integral part of the financial
statements.
16 Annual Report
<PAGE>
SSgA
Tax Free Money Market Fund
Statement of Net Assets, continued
August 31, 1999
Quality Ratings as a % of Value (Unaudited)
VMIG1, SP-1+ or equivalent * ....................... 100%
Economic Sector Emphasis as a % of Value (Unaudited)
Healthcare Revenue ................................. 31%
General Obligation ................................. 13
Industrial Revenue/Pollution Control Revenue ....... 13
Education Revenue .................................. 8
Housing Revenue .................................... 7
Electricity & Power Revenue ........................ 5
Pre-refunded ....................................... 5
Water & Sewer ...................................... 4
Utility Revenue .................................... 3
Airport Revenue .................................... 2
Bond Bank .......................................... 2
Stadium Revenue .................................... 2
Highway Revenue .................................... 1
Port Revenue ....................................... 1
Public Agency Revenue .............................. 1
Student Loan Revenue ............................... 1
Transportation ..................................... 1
-----
100%
=====
* VMIG1: The highest short-term municipal note credit rating given by
Moody's Investors Services to notes with a demand feature which
are of the "best quality."
SP-1+: The highest short-term municipal note credit rating given by
Standard & Poor's Corporation to notes with a "very strong or
strong capacity to pay principal and interest."
See the accompanying notes which are an integral part of the financial
statements.
Annual Report 17
<PAGE>
SSgA
Tax Free Money Market Fund
Statement of Assets and Liabilities
Amounts in thousands (except per share amount) August 31, 1999
<TABLE>
<S> <C> <C>
Assets
Investments at amortized cost which approximates market (Note 2) .................. $ 261,618
Interest receivable ............................................................... 1,560
Deferred organization expenses .................................................... 3
-----------
Total Assets ................................................................ 263,181
Liabilities
Payables:
Dividends ..................................................... $ 598
Accrued fees to affiliates .................................... 176
Other accrued expenses ........................................ 14
-----------
Total Liabilities ........................................................... 788
-----------
Net Assets ........................................................................ $ 262,393
===========
Net Assets Consist of:
Accumulated net realized gain (loss) .............................................. $ 6
Shares of beneficial interest ..................................................... 262
Additional paid-in capital ........................................................ 262,125
-----------
Net Assets ........................................................................ $ 262,393
===========
Net Asset Value, offering and redemption price per share:
($262,393,365 divided by 262,392,256 shares of $.001 par value
shares of beneficial interest outstanding) .................................. $ 1.00
===========
</TABLE>
See the accompanying notes which are an integral part of the financial
statements.
18 Annual Report
<PAGE>
SSgA
Tax Free Money Market Fund
Statement of Operations
Amounts in thousands For the Fiscal Year Ended August 31, 1999
Investment Income
Interest ........................................................ $ 9,154
Expenses
Advisory fees ....................................... $ 710
Administrative fees ................................. 88
Custodian fees ...................................... 58
Distribution fees ................................... 445
Transfer agent fees ................................. 34
Professional fees ................................... 19
Registration fees ................................... 27
Shareholder servicing fees .......................... 162
Trustees' fees ...................................... 6
Amortization of deferred organization expenses ...... 10
Miscellaneous ....................................... 20
---------
Total Expenses ............................................... 1,579
---------
Net investment income .............................................. 7,575
Net Realized Gain (Loss)
Net realized gain (loss) on investments ............................ 34
---------
Net increase in net assets resulting from operations ............... $ 7,609
=========
See the accompanying notes which are an integral part of the financial
statements.
Annual Report 19
<PAGE>
SSgA
Tax Free Money Market Fund
Statement of Changes in Net Assets
Amounts in thousands For the Fiscal Years Ended August 31,
<TABLE>
<CAPTION>
1999 1998
----------- -----------
<S> <C> <C>
Increase (Decrease) in Net Assets
Operations
Net investment income .......................................... $ 7,575 $ 6,800
Net realized gain (loss) ....................................... 34 8
----------- -----------
Net increase in net assets resulting from operations ........ 7,609 6,808
----------- -----------
Distributions
From net investment income ..................................... (7,575) (6,800)
----------- -----------
Share Transactions
Net increase (decrease) in net assets from share transactions .. 2,275 96,574
----------- -----------
Total Net Increase (Decrease) in Net Assets ....................... 2,309 96,582
Net Assets
Beginning of period ............................................ 260,084 163,502
----------- -----------
End of period .................................................. $ 262,393 $ 260,084
=========== ===========
</TABLE>
See the accompanying notes which are an integral part of the financial
statements.
20 Annual Report
<PAGE>
SSgA
Tax Free Money Market Fund
Financial Highlights
The following table includes selected data for a share outstanding throughout
each period and other performance information derived from the financial
statements.
<TABLE>
<CAPTION>
Fiscal Years Ended August 31,
------------------------------------------------------------------
1999 1998 1997 1996 1995*
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period ........... $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000
---------- ---------- ---------- ---------- ----------
Income From Operations
Net investment income ....................... .0267 .0304 .0295 .0302 .0251
---------- ---------- ---------- ---------- ----------
Distributions
From net investment income .................. (.0267) (.0304) (.0295) (.0302) (.0251)
---------- ---------- ---------- ---------- ----------
Net Asset Value, End of Period ................. $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000
========== ========== ========== ========== ==========
Total Return (%)(a) ............................ 2.71 3.08 2.99 3.07 2.54
Ratios/Supplemental Data:
Net Assets, end of period ($ in thousands) .. 262,393 260,084 163,502 45,061 42,607
Ratios to average net assets (%)(b):
Operating expenses, net .................. .56 .56 .58 .57 .59
Operating expenses, gross ................ .56 .56 .58 .57 .60
Net investment income .................... 2.67 3.04 2.98 3.01 3.40
</TABLE>
* For the period December 1, 1994 (commencement of operations) to August 31,
1995.
(a) Periods less than one year are not annualized.
(b) The ratios for the period ended August 31, 1995 are annualized.
Annual Report 21
<PAGE>
SSgA
Tax Free Money Market Fund
Notes to Financial Statements
August 31, 1999
1. Organization
The SSgA Funds (the "Investment Company") is a series mutual fund,
currently comprised of 23 investment portfolios which are in operation as
of August 31, 1999. These financial statements report on one portfolio,
the SSgA Tax Free Money Market Fund (the "Fund"). The Investment Company
is a registered and diversified open- end investment company, as defined
in the Investment Company Act of 1940, as amended (the "1940 Act"), that
was organized as a Massachusetts business trust on October 3, 1987 and
operates under a First Amended and Restated Master Trust Agreement, dated
October 13, 1993, as amended (the "Agreement"). The Investment Company's
Agreement permits the Board of Trustees to issue an unlimited number of
full and fractional shares of beneficial interest at a $.001 par value.
2. Significant Accounting Policies
The Fund's financial statements are prepared in accordance with generally
accepted accounting principles which require the use of management
estimates. The following is a summary of the significant accounting
policies consistently followed by the Fund in the preparation of its
financial statements.
Security valuation: The Fund utilizes the amortized cost valuation method
in accordance with Rule 2a-7 of the 1940 Act, a method by which each
portfolio instrument is initially valued at cost, and thereafter a
constant accretion/amortization to maturity of any discount or premium is
assumed.
Securities transactions: Securities transactions are recorded daily on the
trade date, which in most instances is the same as the settlement date.
Realized gains and losses from the securities transactions, if any, are
recorded on the basis of identified cost.
Investment income: Interest income is recorded daily on the accrual basis.
Federal income taxes: Since the Investment Company is a Massachusetts
business trust, each fund is a separate corporate taxpayer and determines
its net investment income and capital gains (or losses) and the amounts to
be distributed to each fund's shareholders without regard to the income
and capital gains (or losses) of the other funds.
It is the Fund's intention to qualify as a regulated investment company,
as defined by the Internal Revenue Code of 1986, as amended. This requires
the Fund to distribute all of its taxable income. Therefore, the Fund paid
no federal income tax and no federal income tax provision was required.
Dividends and distributions to shareholders: The Fund declares and records
dividends on net investment income daily and pays them monthly. Capital
gain distributions, if any, are generally declared and paid annually. An
additional distribution may be paid by the Fund to avoid imposition of
federal income tax on any remaining undistributed net investment income
and capital gains. The Fund may periodically make reclassifications among
certain of its capital accounts without impacting net asset value for
differences between federal tax regulations and generally accepted
accounting principles.
Expenses: Most expenses can be directly attributed to the Fund. Expenses
which cannot be directly attributed are allocated among all funds based
principally on their relative net assets.
22 Annual Report
<PAGE>
SSgA
Tax Free Money Market Fund
Notes to Financial Statements, continued
August 31, 1999
Deferred organization expenses: The Fund has incurred expenses in
connection with its organization. These costs were deferred and are being
amortized over 60 months on a straight-line basis.
3. Securities Transactions
Investment transactions: For the year ended August 31, 1999, purchases,
sales and maturities of tax-exempt obligations were $1,421,856,838,
$1,328,263,908, and $90,070,000, respectively.
4. Related Parties
Adviser: The Investment Company has an investment advisory agreement with
State Street Bank and Trust Company (the "Adviser") under which the
Adviser directs the investments of the Fund in accordance with its
investment objectives, policies, and limitations. For these services, the
Fund pays a fee to the Adviser, calculated daily and paid monthly, at the
annual rate of .25% of its average daily net assets. The Investment
Company also has contracts with the Adviser to provide custody,
shareholder servicing and transfer agent services to the Fund. These
amounts are presented in the accompanying Statement of Operations.
In addition, the Fund has entered into arrangements with its Adviser
whereby credits realized as a result of uninvested cash balances were used
to reduce a portion of the Fund's expenses. During the period, the Fund's
custodian fees were reduced by $20,306 under these arrangements.
Administrator: The Investment Company has an administration agreement with
Frank Russell Investment Management Company (the "Administrator"), a
wholly owned subsidiary of The Northwestern Mutual Life Insurance Company,
under which the Administrator supervises all non-portfolio investment
aspects of the Investment Company's operations and provides adequate
office space and all necessary office equipment and services, including
telephone service, utilities, stationery supplies, and similar items. The
Investment Company pays the Administrator the following fees for services
supplied by the Administrator pursuant to the Administration Agreement:
(i) an annual fee, payable monthly on a pro rata basis, based on the
following percentages of the average daily net assets of all domestic
funds: $0 up to and including $500 million - .06%; over $500 million to
and including $1 billion - .05%; over $1 billion - .03%, and (ii) less an
amount equal to the sum of certain distribution-related expenses incurred
by the Investment Company's Distributor on behalf of the Fund (up to a
maximum of 10%, for the period September 1, 1997 to December 31, 1997, up
to a maximum of 5%, for the period January 1, 1998 to December 31, 1998
and 0% thereafter, of the asset-based fee determined in (i)). In addition,
the Fund reimburses the Administrator for out-of-pocket expenses and
start-up costs for new funds.
Distributor and Shareholder Servicing: The Investment Company has a
Distribution Agreement with Russell Fund Distributors (the "Distributor")
which is a wholly-owned subsidiary of the Administrator to promote and
offer shares of the Investment Company. The Distributor may enter into
sub-distribution agreements with other non-related parties. The amounts
paid to the Distributor are included in the accompanying Statement of
Operations.
The Investment Company has a Distribution Plan pursuant to Rule 12b-1 (the
"Plan" under the 1940 Act. Under this Plan, the Investment Company is
authorized to make payments to the Distributor, or any Shareholder
Servicing Agent, as defined in the Plan, for providing distribution and
marketing services, for furnishing assistance to investors on an ongoing
basis, and for the reimbursement of direct out-of-pocket expenses incurred
Annual Report 23
<PAGE>
SSgA
Tax Free Money Market Fund
Notes to Financial Statements, continued
August 31, 1999
by the Distributor in connection with the distribution and marketing of
shares of the Investment Company and the servicing of investor accounts.
The Fund has service agreements with the Adviser, State Street Brokerage
Services, Inc. ("SSBSI"), a wholly- owned subsidiary of the Adviser, the
Adviser's Retirement Investment Services Division ("RIS"), the Adviser's
Metropolitan Division of Commercial Banking ("Commercial Banking") and
State Street Solutions ("Solutions")(collectively the "Agents"), as well
as other non-related party service providers. For these services, the Fund
pays .025%, .175%, .175%, .050%, and .175% to the Adviser, SSBSI, RIS,
Commercial Banking, and Solutions, respectively, based upon the average
daily value of all Fund shares held by or for customers of these Agents.
For the year ended August 31, 1999, the Fund was charged shareholder
servicing expenses of $70,992 and $91,719 by the Adviser and Commercial
Banking, respectively. The Fund did not incur any expenses from SSBSI,
RIS, or Solutions during this period.
The combined distribution and shareholder servicing payments shall not
exceed .25% of the average daily value of net assets on an annual basis.
The shareholder servicing payments shall not exceed .20% of the average
daily value of net assets on an annual basis. Any payments that exceed the
maximum amount of allowable reimbursement may be carried forward for two
years following the year in which the expenditure was incurred so long as
the plan is in effect. The Fund's responsibility for any such expenses
carried forward shall terminate at the end of two years following the year
in which the expenditure was incurred. The Trustees or a majority of the
Fund's shareholders have the right, however, to terminate the Distribution
Plan and all payments thereunder at any time. The Fund will not be
obligated to reimburse the Distributor for carryover expenses subsequent
to the Distribution Plan's termination or noncontinuance. There were no
carryover expenses as of August 31, 1999.
Board of Trustees: Through May 31, 1999, the Investment Company paid each
Trustee not affiliated with the Investment Company a retainer of $48,000
annually, $1,500 for each board meeting attended, an additional $1,500 for
attending the annual audit committee meeting, and reimbursement for
out-of-pocket expenses. As of June 1, 1999, each Trustee receives $2,500
for each board meeting attended, an additional $2,500 for attending the
annual audit committee meeting and $2,500 for the valuation committee fee
in addition to the $48,000 annual retainer. These expenses are allocated
among all of the Funds based upon their relative net assets.
Accrued fees payable to affiliates and trustees as of August 31, 1999 were
as follows:
Advisory fees $ 108,585
Administration fees 7,831
Custodian fees 8,446
Distribution fees 27,188
Shareholder servicing fees 15,783
Transfer agent fees 7,921
Trustees' fees 375
----------
$ 176,129
==========
24 Annual Report
<PAGE>
SSgA
Tax Free Money Market Fund
Notes to Financial Statements, continued
August 31, 1999
Beneficial Interest: As of August 31, 1999, three shareholders (two of
which were also affiliates of the Investment Company) were record owners
of approximately 48%, 25% and 18%, respectively, of the total outstanding
shares of the Fund.
5. Fund Share Transactions (On a Constant Dollar Basis):
<TABLE>
<CAPTION>
(amounts in thousands)
Fiscal Years Ended August 31,
-----------------------------
1999 1998
-------- --------
<S> <C> <C>
Proceeds from shares sold ....................... 887,427 963,989
Proceeds from reinvestment of distributions ..... 4,738 3,846
Payments for shares redeemed .................... (889,890) (871,261)
-------- --------
Total net increase (decrease) ................... 2,275 96,574
======== ========
</TABLE>
Annual Report 25
<PAGE>
SSgA Tax Free Money Market Fund
One International Place, 27th Floor
Boston, Massachusetts 02110
(800) 997-7327
- --------------------------------------------------------------------------------
Trustees
Lynn L. Anderson, Chairman
William L. Marshall
Steven J. Mastrovich
Patrick J. Riley
Richard D. Shirk
Bruce D. Taber
Henry W. Todd
Officers
Lynn L. Anderson, President, Treasurer and CEO
Mark E. Swanson, Assistant Secretary, Assistant
Treasurer and Principal Accounting Officer
J. David Griswold, Vice President and Secretary
Deedra S. Walkey, Assistant Secretary
Rick J. Chase, Assistant Secretary
Carla L. Anderson, Assistant Secretary
Investment Adviser
State Street Bank and Trust Company
225 Franklin Street
Boston, Massachusetts 02110
Custodian, Transfer Agent and
Office of Shareholder Inquiries
State Street Bank and Trust Company
1776 Heritage Drive
North Quincy, Massachusetts 02171
(800) 647-7327
Distributor
Russell Fund Distributors, Inc.
One International Place, 27th Floor
Boston, Massachusetts 02110
(800) 997-7327
Administrator
Frank Russell Investment Management Company
909 A Street
Tacoma, Washington 98402
Legal Counsel
Goodwin, Procter & Hoar LLP
Exchange Place
Boston, Massachusetts 02109
Independent Accountants
PricewaterhouseCoopers LLP
160 Federal Street
Boston, Massachusetts 02110
26 Annual Report
<PAGE>
SSgA(R) Funds
US Government Money Market Fund
Annual Report
August 31, 1999
Table of Contents
Page
Chairman's Letter ................................................... 4
Portfolio Management Discussion and Analysis ........................ 6
Report of Independent Accountants ................................... 8
Financial Statements ................................................ 9
Financial Highlights ................................................ 14
Notes to Financial Statements ....................................... 15
Fund Management and Service Providers ............................... 19
"SSgA(R)" is a registered trademark of State Street Corporation and is licensed
for use by the SSgA Funds.
This report is prepared from the books and records of the Fund and it is
submitted for the general information of shareholders. This information is for
distribution to prospective investors only when preceded or accompanied by a
SSgA Funds Prospectus containing more complete information concerning the
investment objective and operations of the Fund, charges and expenses. The
Prospectus should be read carefully before an investment is made.
Performance is historical and assumes reinvestment of all dividends and capital
gains. Investment return and principal value will fluctuate so that an
investor's shares, when redeemed, may be worth more or less than when purchased.
Past performance is not indicative of future results. An investment in a money
market fund is neither insured nor guaranteed by the US government. There can be
no assurance that a money market fund will be able to maintain a stable net
asset value of $1.00 per share. Russell Fund Distributors, Inc., is the
distributor of the SSgA Funds.
<PAGE>
SSgA US Government Money Market Fund
- --------------------------------------------------------------------------------
Letter From the Chairman of State Street Global Advisors
- --------------------------------------------------------------------------------
Dear Shareholders,
It is my pleasure to provide you with the SSgA Funds annual report for the
fiscal year ended August 31, 1999. The SSgA Fund family has grown to include
twenty-three portfolios covering a broad range of investment strategies. The
enclosed information provides an overview of the investment process for the SSgA
US Government Money Market Fund. This overview contains market updates,
performance, and financial information for the Fund. I hope you will find this
information a useful reference as you review your investment strategy.
During the past fiscal year, the SSgA Fund family has opened two new Funds. The
names and investment objectives for these funds are as follows:
The SSgA Aggressive Equity Fund seeks to maximize total return through investing
in US equity securities that are undervalued relative to their growth potential
as measured by SSgA's proprietary models.
The SSgA IAM Shares Fund seeks to maximize total return by investing primarily
in equity securities of companies that have entered into collective bargaining
agreements with the International Association of Machinists and Aerospace
Workers or affiliated labor unions.
Additionally, three SSgA Funds achieved a five-year track record during the 1999
fiscal year. These funds include the two institutional money market funds, SSgA
US Treasury and SSgA Prime Money Market Funds and the SSgA Emerging Markets
Fund. We are proud of our long-term record and look forward to having additional
funds complete their five-year anniversary.
In today's complex global marketplace, we are continually researching new
products and ideas to introduce to our fund family. Here at SSgA, we are
committed to providing a wide range of competitive investment vehicles to
fulfill your investment needs.
I would like to thank you for choosing the SSgA Funds.
Sincerely,
/s/ Nicholas A. Lopardo
Nicholas A. Lopardo
State Street Global Advisors
Chairman and Chief Executive Officer
4 Annual Report
<PAGE>
SSgA US Government Money Market Fund
- --------------------------------------------------------------------------------
Management of the Funds
- --------------------------------------------------------------------------------
[PHOTO]
Nicholas A. Lopardo
Chairman and Chief Executive Officer
A Team Approach to Investment Management
Our investment strategies are the product of the combined experience of our
professional staff. Portfolio Managers work together to develop and enhance the
techniques that drive our investment processes. As a result, the portfolios we
manage benefit from the knowledge of the entire team.
Ms. Lisa Hatfield, Principal, has been the portfolio manager primarily
responsible for investment decisions regarding the SSgA US Government Money
Market Fund since June 1994. Ms. Hatfield has been with State Street since 1986
and has managed several money market funds since 1987. She received a BS from
Suffolk University. There are ten other portfolio managers working with Ms.
Hatfield.
Annual Report 5
<PAGE>
SSgA US Government Money Market Fund
- --------------------------------------------------------------------------------
Portfolio Management Discussion and Analysis
- --------------------------------------------------------------------------------
Objective: Maximize current income while preserving capital and liquidity.
Invests in: Obligations of the US Government, its Agencies or Instrumentalities.
Strategy: Fund Managers base their decisions on the relative attractiveness of
different money market investments which can vary depending on the general level
of interest rates as well as supply/demand imbalances in the market.
- --------------------------------------------------------------------------------
GROWTH OF A $10,000 INVESTMENT
Dates US Gov't Money Market Saloman Smith Barney 3-Month T-Bill Index
Inception* $10,000 $10,000
1991 $10,306 $10,293
1992 $10,769 $10,731
1993 $11,100 $11,061
1994 $11,466 $11,454
1995 $12,083 $12,093
1996 $12,720 $12,740
1997 $13,381 $13,409
1998 $14,094 $14,109
1999 $14,762 $14,765
================================================================================
Performance Review
The Fund had a total return of 4.74% for the fiscal year ended August 31, 1999.
This compares favorably to the return of the benchmark Salomon Smith Barney
3-Month Treasury Bill Index, which gained 4.65% for the same period. The Fund's
performance is net of operating expenses, whereas Index results do not include
expenses of any kind. The Salomon Smith Barney 3-Month Treasury Bill Index was
chosen as a standard, well known representation of money market rates.
- --------------------------------------------------------------------------------
SSgA US Government Money Market Fund
- --------------------------------------------------------------------------------
Period Ended Growth of Total
08/31/99 $10,000 Return
- -------------- --------- ------
1 Year $ 10,474 4.74%
5 Years $ 12,874 5.18%+
Inception $ 14,762 4.69%+
- --------------------------------------------------------------------------------
Salomon Smith Barney 3-Month Treasury Bill Index
- --------------------------------------------------------------------------------
Period Ended Growth of Total
08/31/99 $10,000 Return
- -------------- --------- ------
1 Year $ 10,465 4.65%
5 Years $ 12,890 5.21%+
Inception $ 14,765 4.69%+
See related Notes on following page.
6 Annual Report
<PAGE>
SSgA US Government Money Market Fund
- --------------------------------------------------------------------------------
Portfolio Management Discussion and Analysis
- --------------------------------------------------------------------------------
Market and Portfolio Highlights
The year began with the Russian government defaulting on portions of its debt,
and international investors losing billions of dollars as a result. Russia's
meltdown sent tremors through Latin American economies and posed a significant
threat to Mexico, a major US trading partner. This turmoil caused a huge "flight
to quality", where US treasuries were deemed one of the only safe investments.
As treasuries rallied and credit spreads widened, it became apparent that market
participants, as well as the Fed, feared a global financial meltdown.
On September 29, 1998, the Federal Reserve Open Market Committee (FOMC) voted to
cut the Federal Funds rate by 25 basis points to 5.25%, its lowest level since
January 1996. This action was quickly followed by two more 25 basis point
easings, with the last move occurring on November 17th. The US economy remained
robust, with both low employment and low inflation, but lower rates were needed
to head off the potentially serious threat of lack of liquidity in the markets
and ultimately to continued US economic growth. The last Fed rate cut was an
insurance policy, making it clear that the world's largest Central Bank was
willing to help minimize further market contagion.
The actions by the Federal Reserve were successful in bolstering liquidity and
preserving growth. The wealth effect from real estate and stock market gains,
coupled with a historically low unemployment rate, drove confidence and spending
to record highs. GDP growth has averaged over 3% for the past two quarters,
while inflation indicators have remained markedly well behaved. Recently,
concerns of increasing asset prices, slowing productivity gains, and recovering
foreign economies across the Pacific-Rim raised concerns with the Federal
Reserve. On June 30, 1999, they opted to raise the Federal Funds rate from 4.75%
to 5.00%, and again on August 24th to 5.25%. These moves by the FOMC retract
most of last fall's easings and leaves the door open to another tightening, if
required, in the final quarter of 1999.
In the last year, the SSgA US Government Money Market Fund was managed
consistently with its objective of providing safety of principal and liquidity
by investing in high quality investments and providing competitive returns. The
Fund's net assets trended higher, increasing by 31% to $1.2 billion over the
past twelve months. New cash was invested in a combination of fixed and floating
rate securities. Over the past year, mounting pressures from continuing domestic
strength and recovering foreign economies created a very steep short yield curve
due to the markets' perception of Fed tightening. The Fund took advantage of
higher rates extending in one-year securities on market weakness. Given that the
Fed may increase interest rates throughout 1999, the Manager also looked to
increase exposure in floating rate securities which offer protection against
rising interest rates. The Fund's investment strategy concentrated primarily on
indices such as one- and three-month LIBOR (London Interbank Offering Rate),
with a small allocation based on Fed Funds and Prime rates. The average maturity
of the Fund ranged from 37 to 59 days over the last year, ending at 53 days on
August 31, 1999.
--------------------
Notes: The following notes relate to the Growth of $10,000 graph and table on
the preceding page.
* The Fund commenced operations on March 1, 1991. Index comparison also
began on March 1, 1991.
** Equal dollar amounts of 3-month Treasury bills are purchased at the
beginning of each of three consecutive months. As each bill matures, all
proceeds are rolled over or reinvested in a new 3-month bill. The income
used to calculate the monthly return is derived by subtracting the
original amount invested from the maturity value. The yield curve average
is the basis for calculating the return on the Index. The Index is
rebalanced monthly by market capitalization.
+ Annualized.
Performance is historical and assumes reinvestment of all dividends and capital
gains. Investment return and principal value will fluctuate so that an
investor's shares, when redeemed, may be worth more or less than when purchased.
Past performance is not indicative of future results.
An investment in a money market fund is neither insured nor guaranteed by the US
Government. There can be no assurance that a money market fund will be able to
maintain a stable net asset value of $1.00 per share.
Annual Report 7
<PAGE>
Report of Independent Accountants
To the Shareholders and Board of Trustees
of the SSgA Funds:
In our opinion, the accompanying statement of assets and liabilities and
statement of net assets, and the related statements of operations and of changes
in net assets and the financial highlights present fairly, in all material
respects, the financial position of SSgA US Government Money Market Fund (the
"Fund") at August 31, 1999, the results of its operations for the fiscal year
then ended and the changes in its net assets for each of the two fiscal years in
the period then ended, and the financial highlights for each of the five fiscal
years in the period then ended, in conformity with generally accepted accounting
principles. These financial statements and financial highlights (hereafter
referred to as "financial statements") are the responsibility of the Fund's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these financial
statements in accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of securities at August 31, 1999 by correspondence with the
custodian, provide a reasonable basis for the opinion expressed above.
Boston, Massachusetts
October 11, 1999
/s/ Pricewaterhousecoopers LLP
8 Annual Report
<PAGE>
SSgA
US Government Money Market Fund
Statement of Net Assets
August 31, 1999
<TABLE>
<CAPTION>
Principal
Amount Date Value
(000) Rate of (000)
$ % Maturity $
-------- ----- -------- -------
<S> <C> <C> <C> <C>
United States Government Agencies - 76.7%
Federal Farm Credit Bank ....................................... 22,000 4.760 01/18/00 21,982
Federal Farm Credit Bank ....................................... 15,000 5.000 05/03/00 14,988
Federal Home Loan Bank ......................................... 60,000 4.900 01/14/00 59,999
Federal Home Loan Bank ......................................... 15,000 4.790 02/04/00 14,995
Federal Home Loan Bank ......................................... 10,000 4.970 04/20/00 9,996
Federal Home Loan Bank ......................................... 20,000 5.100 05/17/00 19,994
Federal Home Loan Bank ......................................... 15,000 5.520 08/02/00 14,985
Federal Home Loan Bank (a) ..................................... 50,000 5.028 09/08/99 50,000
Federal Home Loan Bank (a) ..................................... 50,000 5.370 10/13/99 50,000
Federal Home Loan Bank (a) ..................................... 40,000 5.370 11/16/99 39,994
Federal Home Loan Bank (a) ..................................... 25,000 4.851 12/01/99 24,995
Federal Home Loan Bank (a) ..................................... 25,000 5.295 04/14/00 24,993
Federal Home Loan Bank (a) ..................................... 25,000 5.086 07/12/00 24,989
Federal Farm Credit Bank (a) ................................... 50,000 5.132 08/02/00 49,977
Federal Home Loan Bank Discount Notes .......................... 30,000 5.210 09/22/99 29,909
Federal Home Loan Mortgage Corp. ............................... 20,000 5.505 07/14/00 19,980
Federal Home Loan Mortgage Corp. (a) ........................... 29,800 5.083 05/18/00 29,783
Federal Home Loan Mortgage Corp. Discount Notes ................ 20,000 5.010 09/03/99 19,994
Federal Home Loan Mortgage Corp. Discount Notes ................ 20,000 4.965 09/09/99 19,978
Federal Home Loan Mortgage Corp. Discount Notes ................ 25,000 4.740 09/10/99 24,970
Federal Home Loan Mortgage Corp. Discount Notes ................ 30,250 4.730 10/05/99 30,115
Federal Home Loan Mortgage Corp. Discount Notes ................ 40,000 5.190 10/05/99 39,804
Federal National Mortgage Association (a) ...................... 25,000 5.456 03/15/00 24,992
Federal National Mortgage Association (MTN) .................... 25,000 5.020 04/26/00 24,991
Federal National Mortgage Association (MTN)(a) ................. 40,000 4.973 03/23/00 39,986
Federal National Mortgage Association (MTN)(a) ................. 20,000 5.160 05/10/00 19,992
Federal National Mortgage Association (MTN)(a) ................. 20,000 4.997 08/02/00 19,988
Federal National Mortgage Association (MTN)(a) ................. 20,000 5.183 08/04/00 19,989
Federal National Mortgage Association (MTN)(a) ................. 15,000 5.370 08/09/00 14,993
Federal National Mortgage Association Discount Notes ........... 50,870 5.150 09/20/99 50,732
Federal National Mortgage Association Discount Notes ........... 45,000 5.505 02/24/00 43,789
Student Loan Marketing Association (MTN) ....................... 15,000 4.845 02/10/00 14,990
Student Loan Marketing Association (MTN)(a) .................... 40,000 5.330 02/10/00 39,993
-------
Total United States Government Agencies (cost $950,855) ........................................ 950,855
-------
Total Investments - 76.7% (amortized cost $950,855) ............................................ 950,855
-------
</TABLE>
Annual Report 9
<PAGE>
SSgA
US Government Money Market Fund
Statement of Net Assets, continued
August 31, 1999
<TABLE>
<CAPTION>
Value
(000)
$
---------
<S> <C>
Repurchase Agreements - 23.4%
Agreement with Deutsche Bank AG of $35,000
acquired August 31, 1999 at 5.500% to be repurchased at $35,005
on September 1, 1999, collateralized by:
$36,640 various United States Government Agencies, valued at $35,743 .......................... 35,000
Agreement with Lehman Brothers, Inc. of $60,000
acquired August 31, 1999 at 5.550% to be repurchased at $60,009
on September 1, 1999, collateralized by:
$48,095 various United States Treasury Obligations, valued at $61,249 ......................... 60,000
Agreement with Lehman Brothers, Inc. of $29,838
acquired August 31, 1999 at 5.570% to be repurchased at $29,843
on September 1, 1999, collateralized by:
$34,158 various United States Government Obligations, valued at $30,759 ....................... 29,838
Agreement with Warburg Dillon Read, L.L.C. of $165,000
acquired August 31, 1999 at 5.530% to be repurchased at $165,025
on September 1, 1999, collateralized by:
$167,048 various United States Treasury Obligations, valued at $168,404 ....................... 165,000
---------
Total Repurchase Agreements (identified cost $289,838) ................................................ 289,838
---------
Total Investments and Repurchase Agreements - 100.1% (cost $1,240,693)(b) ............................. 1,240,693
Other Assets and Liabilities, Net - (0.1%) ............................................................ (1,389)
---------
Net Assets - 100.0% ................................................................................... 1,239,304
=========
</TABLE>
(a) Adjustable or floating rate security.
(b) The identified cost for federal income tax purposes is the same as shown
above.
Abbreviations:
MTN - Medium Term Note
See the accompanying notes which are an integral part of the financial
statements.
10 Annual Report
<PAGE>
SSgA
US Government Money Market Fund
Statement of Assets and Liabilities
Amounts in thousands (except per share amount) August 31, 1999
<TABLE>
<S> <C> <C>
Assets
Investments at amortized cost which approximates market .................................. $ 950,855
Repurchase agreements (identified cost $289,838) ......................................... 289,838
Interest receivable ...................................................................... 4,260
-------------
Total Assets ....................................................................... 1,244,953
Liabilities
Payables:
Dividends ................................................................. $ 4,726
Accrued fees to affiliates ................................................ 830
Other accrued expenses .................................................... 93
------------
Total Liabilities .................................................................. 5,649
-------------
Net Assets ............................................................................... $ 1,239,304
=============
Net Assets Consist of:
Accumulated net realized gain (loss) ..................................................... $ 29
Shares of beneficial interest ............................................................ 1,239
Additional paid-in capital ............................................................... 1,238,036
-------------
Net Assets ............................................................................... $ 1,239,304
=============
Net Asset Value, offering and redemption price per share:
($1,239,303,577 divided by 1,239,274,618 shares of $.001 par value
shares of beneficial interest outstanding) ......................................... $ 1.00
=============
</TABLE>
See the accompanying notes which are an integral part of the financial
statements.
Annual Report 11
<PAGE>
SSgA
US Government Money Market Fund
Statement of Operations
Amounts in thousands For the Fiscal Year Ended August 31, 1999
<TABLE>
<S> <C> <C>
Investment Income
Interest .............................................................................. $ 66,654
Expenses
Advisory fees ............................................................. $ 3,309
Administrative fees ....................................................... 412
Custodian fees ............................................................ 356
Distribution fees ......................................................... 317
Transfer agent fees ....................................................... 98
Professional fees ......................................................... 24
Registration fees ......................................................... 91
Shareholder servicing fees ................................................ 864
Trustees' fees ............................................................ 26
Miscellaneous ............................................................. 37
------------
Total Expenses ..................................................................... 5,534
-------------
Net investment income .................................................................... 61,120
Net Realized Gain (Loss)
Net realized gain (loss) on investments .................................................. 2
-------------
Net increase in net assets resulting from operations ..................................... $ 61,122
=============
</TABLE>
See the accompanying notes which are an integral part of the financial
statements.
12 Annual Report
<PAGE>
SSgA
US Government Money Market Fund
Statement of Changes in Net Assets
Amounts in thousands For the Fiscal Years Ended August 31, 1999
<TABLE>
<CAPTION>
1999 1998
------------ ------------
<S> <C> <C>
Increase (Decrease) in Net Assets
Operations
Net investment income .................................................... $ 61,120 $ 44,869
Net realized gain (loss) ................................................. 2 25
------------ ------------
Net increase in net assets resulting from operations .................. 61,122 44,894
------------ ------------
Distributions
From net investment income ............................................... (61,120) (44,869)
------------ ------------
Share Transactions
Net increase (decrease) in net assets from share transactions ............ 293,405 41,389
------------ ------------
Total Net Increase (Decrease) in Net Assets ................................. 293,407 41,414
Net Assets
Beginning of period ...................................................... 945,897 904,483
------------ ------------
End of period ............................................................ $ 1,239,304 $ 945,897
============ ============
</TABLE>
See the accompanying notes which are an integral part of the financial
statements.
Annual Report 13
<PAGE>
SSgA
US Government Money Market Fund
Financial Highlights
The following table includes selected data for a share outstanding throughout
each period and other performance information derived from the financial
statements.
<TABLE>
<CAPTION>
Fiscal Years Ended August 31,
------------------------------------------------------------
1999 1998 1997 1996 1995
---------- --------- --------- ---------- --------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period ...................... $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000
---------- --------- --------- ---------- --------
Income From Operations
Net investment income .................................. .0462 .0500 .0500 .0515 .0528
---------- --------- --------- ---------- --------
Distributions
From net investment income ............................. (.0462) (.0500) (.0500) (.0515) (.0528)
---------- --------- --------- ---------- --------
Net Asset Value, End of Period ............................ $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000
========== ========= ========= ========= ========
Total Return (%) .......................................... 4.74 5.33 5.19 5.27 5.38
Ratios/Supplemental Data:
Net Assets, end of period ($ in thousands) ............. 1,239,304 945,897 904,483 683,210 490,138
Ratios to average net assets (%):
Operating expenses .................................. .42 .42 .44 .40 .42
Net investment income ............................... 4.62 5.20 5.08 5.12 5.37
</TABLE>
14 Annual Report
<PAGE>
SSgA
US Government Money Market Fund
Notes to Financial Statements
August 31, 1999
1. Organization
The SSgA Funds (the "Investment Company") is a series mutual fund,
currently comprised of 23 investment portfolios which are in operation as
of August 31, 1999. These financial statements report on one portfolio,
the SSgA US Government Money Market Fund (the "Fund"). The Investment
Company is a registered and diversified open-end investment company, as
defined in the Investment Company Act of 1940, as amended (the "1940
Act"), that was organized as a Massachusetts business trust on October 3,
1987 and operates under a First Amended and Restated Master Trust
Agreement, dated October 13, 1993, as amended (the "Agreement"). The
Investment Company's Agreement permits the Board of Trustees to issue an
unlimited number of full and fractional shares of beneficial interest at a
$.001 par value.
2. Significant Accounting Policies
The Fund's financial statements are prepared in accordance with generally
accepted accounting principles which require the use of management
estimates. The following is a summary of the significant accounting
policies consistently followed by the Fund in the preparation of its
financial statements.
Security valuation: The Fund utilizes the amortized cost valuation method
in accordance with Rule 2a-7 of the 1940 Act, a method by which each
portfolio instrument is initially valued at cost, and thereafter a
constant accretion/amortization to maturity of any discount or premium is
assumed.
Securities transactions: Securities transactions are recorded on the trade
date, which in most instances is the same as the settlement date. Realized
gains and losses from the securities transactions, if any, are recorded on
the basis of identified cost.
Investment income: Interest income is recorded daily on the accrual basis.
Federal income taxes: Since the Investment Company is a Massachusetts
business trust, each fund is a separate corporate taxpayer and determines
its net investment income and capital gains (or losses) and the amounts to
be distributed to each fund's shareholders without regard to the income
and capital gains (or losses) of the other funds.
It is the Fund's intention to qualify as a regulated investment company,
as defined by the Internal Revenue Code of 1986, as amended. This requires
the Fund to distribute all of its taxable income. Therefore, the Fund paid
no federal income taxes and no federal income tax provision was required.
Dividends and distributions to shareholders: The Fund declares and records
dividends on net investment income daily and pays them monthly. Capital
gain distributions, if any, are generally declared and paid annually. An
additional distribution may be paid by the Fund to avoid imposition of
federal income tax on any remaining undistributed net investment income
and capital gains. The Fund may periodically make reclassifications among
certain of its capital accounts without impacting net asset value for
differences between federal tax regulations and generally accepted
accounting principles.
Expenses: Most expenses can be directly attributed to the Fund. Expenses
which cannot be directly attributed are allocated among all funds based
principally on their relative net assets.
Annual Report 15
<PAGE>
SSgA
US Government Money Market Fund
Notes to Financial Statements, continued
August 31, 1999
Repurchase agreements: The Fund may engage in repurchase and tri-party
repurchase agreements with several financial institutions whereby the
Fund, through its custodian or third-party custodian, receives delivery of
the underlying securities. The market value of these securities (including
accrued interest) on acquisition date is required to be an amount equal to
at least 102% of the repurchase price. State Street Bank and Trust Company
(the "Advisor") will monitor repurchase agreements daily to determine that
the market value (including accrued interest) of the underlying securities
remains equal to at least 102% of the repurchase price at Fedwire closing
time. The Adviser or third-party custodian will notify the seller to
immediately increase the collateral on the repurchase agreement to 102% of
the repurchase price if collateral falls below 102%.
3. Securities Transactions
Investment transactions: For the year ended August 31, 1999, purchases and
maturities of US Government and Agency obligations, excluding repurchase
agreements aggregated to $3,945,524,362 and $3,573,950,000, respectively.
4. Related Parties
Adviser: The Investment Company has an investment advisory agreement with
State Street Bank and Trust Company under which the Adviser directs the
investments of the Fund in accordance with its investment objectives,
policies, and limitations. For these services, the Fund pays a fee to the
Adviser, calculated daily and paid monthly, at the annual rate of .25% of
its average daily net assets. The Investment Company also has contracts
with the Adviser to provide custody, shareholder servicing and transfer
agent services to the Fund. These amounts are presented in the
accompanying Statement of Operations.
In addition, the Fund has entered into arrangements with its Adviser
whereby credits realized as a result of uninvested cash balances were used
to reduce a portion of the Fund's expenses. During the period, the Fund's
custodian fees were reduced by $6,109 under these arrangements.
Administrator: The Investment Company has an administration agreement with
Frank Russell Investment Management Company (the "Administrator"), a
wholly owned subsidiary of The Northwestern Mutual Life Insurance Company,
under which the Administrator supervises all non-portfolio investment
aspects of the Investment Company's operations and provides adequate
office space and all necessary office equipment and services, including
telephone service, utilities, stationery supplies, and similar items. The
Investment Company pays the Administrator the following fees for services
supplied by the Administrator pursuant to the Administration Agreement:
(i) an annual fee, payable monthly on a pro rata basis, based on the
following percentages of the average daily net assets of all domestic
funds: $0 up to and including $500 million - .06%; over $500 million to
and including $1 billion - .05%; over $1 billion - .03%, and (ii) less an
amount equal to the sum of certain distribution-related expenses incurred
by the Investment Company's Distributor on behalf of the Fund (up to a
maximum of 10%, for the period September 1, 1997 to December 31, 1997, up
to a maximum of 5%, for the period January 1, 1998 to December 31, 1998
and 0% thereafter, of the asset-based fee determined in (i)). In addition,
the Fund reimburses the Administrator for out-of-pocket expenses and
start-up costs for new funds.
16 Annual Report
<PAGE>
SSgA
US Government Money Market Fund
Notes to Financial Statements, continued
August 31, 1999
Distributor and Shareholder Servicing: The Investment Company has a
Distribution Agreement with Russell Fund Distributors (the "Distributor")
which is a wholly-owned subsidiary of the Administrator to promote and
offer shares of the Investment Company. The Distributor may enter into
sub-distribution agreements with other non-related parties. The amounts
paid to the Distributor are included in the accompanying Statement of
Operations.
The Investment Company has a Distribution Plan pursuant to Rule 12b-1 (the
"Plan") under the 1940 Act. Under this Plan, the Investment Company is
authorized to make payments to the Distributor, or any Shareholder
Servicing Agent, as defined in the Plan, for providing distribution and
marketing services, for furnishing assistance to investors on an ongoing
basis, and for the reimbursement of direct out-of-pocket expenses charged
by the Distributor in connection with the distribution and marketing of
shares of the Investment Company and the servicing of investor accounts.
The Fund has service agreements with the Adviser, State Street Brokerage
Services, Inc. ("SSBSI"), a wholly- owned subsidiary of the Adviser, the
Adviser's Retirement Investment Services Division ("RIS"), the Adviser's
Metropolitan Division of Commercial Banking ("Commercial Banking") and
State Street Solutions ("Solutions")(collectively the "Agents"), as well
as other non-related party service providers. For these services, the Fund
pays .025%, .175%, .175%, .175%, and .175% to the Adviser, SSBSI, RIS,
Commercial Banking, and Solutions, respectively, based upon the average
daily value of all Fund shares held by or for customers of these Agents.
For the year ended August 31, 1999, the Fund was charged shareholder
servicing expenses of $330,626, $26,306 and $278,599 by the Adviser, RIS
and Commercial Banking, respectively. The Fund did not incur any expenses
from SSBSI or Solutions during this period.
The combined distribution and shareholder servicing payments shall not
exceed .25% of the average daily value of net assets on an annual basis.
The shareholder servicing payments shall not exceed .20% of the average
daily value of net assets on an annual basis. Any payments that exceed the
maximum amount of allowable reimbursement may be carried forward for two
years following the year in which the expenditure was incurred so long as
the plan is in effect. The Fund's responsibility for any such expenses
carried forward shall terminate at the end of two years following the year
in which the expenditure was incurred. The Trustees or a majority of the
Fund's shareholders have the right, however, to terminate the Distribution
Plan and all payments thereunder at any time. The Fund will not be
obligated to reimburse the Distributor for carryover expenses subsequent
to the Distribution Plan's termination or noncontinuance. There were no
carryover expenses as of August 31, 1999.
Board of Trustees: Through May 31, 1999, the Investment Company paid each
Trustee not affiliated with the Investment Company a retainer of $48,000
annually, $1,500 for each board meeting attended, an additional $1,500 for
attending the annual audit committee meeting, and reimbursement for
out-of-pocket expenses. As of June 1, 1999 each Trustee receives $2,500
for each board meeting attended, an additional $2,500 for attending the
annual audit committee meeting and $2,500 for the valuation committee fee
in addition to the $48,000 annual retainer. These expenses are allocated
among all of the Funds based upon their relative net assets.
Annual Report 17
<PAGE>
SSgA
US Government Money Market Fund
Notes to Financial Statements, continued
August 31, 1999
Accrued fees payable to affiliates and trustees as of August 31, 1999 were as
follows:
Advisory fees $ 541,706
Administration fees 34,532
Custodian fees 6,164
Distribution fees 4,886
Shareholder servicing fees 235,898
Transfer agent fees 4,319
Trustees' fees 2,867
------------
$ 830,372
============
5. Fund Share Transactions (On a Constant Dollar Basis):
(amounts in thousands)
Fiscal Years Ended August 31,
------------------------------
1999 1998
----------- ----------
Proceeds from shares sold ................ 11,294,180 8,260,765
Proceeds from reinvestment of
distributions .......................... 46,676 32,317
Payments for shares redeemed ............. (11,047,451) (8,251,693)
----------- ----------
Total net increase (decrease) ............ 293,405 41,389
=========== ==========
18 Annual Report
<PAGE>
SSgA US Government Money Market Fund
One International Place, 27th Floor
Boston, Massachusetts 02110
(800) 997-7327
- --------------------------------------------------------------------------------
Trustees
Lynn L. Anderson, Chairman
William L. Marshall
Steven J. Mastrovich
Patrick J. Riley
Richard D. Shirk
Bruce D. Taber
Henry W. Todd
Officers
Lynn L. Anderson, President, Treasurer and CEO
Mark E. Swanson, Assistant Secretary, Assistant
Treasurer and Principal Accounting Officer
J. David Griswold, Vice President and Secretary
Deedra S. Walkey, Assistant Secretary
Rick J. Chase, Assistant Secretary
Carla L. Anderson, Assistant Secretary
Investment Adviser
State Street Bank and Trust Company
225 Franklin Street
Boston, Massachusetts 02110
Custodian, Transfer Agent and
Office of Shareholder Inquiries
State Street Bank and Trust Company
1776 Heritage Drive
North Quincy, Massachusetts 02171
(800) 647-7327
Distributor
Russell Fund Distributors, Inc.
One International Place, 27th Floor
Boston, Massachusetts 02110
(800) 997-7327
Administrator
Frank Russell Investment Management Company
909 A Street
Tacoma, Washington 98402
Legal Counsel
Goodwin, Procter & Hoar LLP
Exchange Place
Boston, Massachusetts 02109
Independent Accountants
PricewaterhouseCoopers LLP
160 Federal Street
Boston, Massachusetts 02110
Annual Report 19
<PAGE>
SSgA(R) Funds
Growth and Income Fund
Annual Report
August 31, 1999
Table of Contents
Page
Chairman's Letter............................................. 4
Portfolio Management Discussion and Analysis.................. 6
Report of Independent Accountants............................. 8
Financial Statements.......................................... 9
Financial Highlights.......................................... 14
Notes to Financial Statements................................. 15
Tax Information............................................... 21
Fund Management and Service Providers......................... 22
"SSgA(R)" is a registered trademark of State Street Corporation and is licensed
for use by the SSgA Funds.
This report is prepared from the books and records of the Fund and it is
submitted for the general information of shareholders. This information is for
distribution to prospective investors only when preceded or accompanied by a
SSgA Funds Prospectus containing more complete information concerning the
investment objective and operations of the Fund, charges and expenses. The
Prospectus should be read carefully before an investment is made.
Performance is historical and assumes reinvestment of all dividends and capital
gains. Investment return and principal value will fluctuate so that an
investor's shares, when redeemed, may be worth more or less than when purchased.
Past performance is not indicative of future results. Russell Fund Distributors,
Inc., is the distributor of the SSgA Funds.
<PAGE>
SSgA Growth and Income Fund
- --------------------------------------------------------------------------------
Letter From the Chairman of State Street Global Advisors
- --------------------------------------------------------------------------------
Dear Shareholders,
It is my pleasure to provide you with the SSgA Funds annual report for the
fiscal year ended August 31, 1999. The SSgA Fund family has grown to include
twenty-three portfolios covering a broad range of investment strategies. The
enclosed information provides an overview of the investment process for the SSgA
Growth and Income Fund. This overview contains market updates, performance, and
financial information for the Fund. I hope you will find this information a
useful reference as you review your investment strategy.
During the past fiscal year, the SSgA Fund family has opened two new Funds. The
names and investment objectives for these funds are as follows:
The SSgA Aggressive Equity Fund seeks to maximize total return through investing
in US equity securities that are undervalued relative to their growth potential
as measured by SSgA's proprietary models.
The SSgA IAM Shares Fund seeks to maximize total return by investing primarily
in equity securities of companies that have entered into collective bargaining
agreements with the International Association of Machinists and Aerospace
Workers or affiliated labor unions.
Additionally, three SSgA Funds achieved a five-year track record during the 1999
fiscal year. These funds include the two institutional money market funds, SSgA
US Treasury and SSgA Prime Money Market Funds and the SSgA Emerging Markets
Fund. We are proud of our long-term record and look forward to having additional
funds complete their five-year anniversary.
In today's complex global marketplace, we are continually researching new
products and ideas to introduce to our fund family. Here at SSgA, we are
committed to providing a wide range of competitive investment vehicles to
fulfill your investment needs.
I would like to thank you for choosing the SSgA Funds.
Sincerely,
/s/ Nicholas A. Lopardo
Nicholas A. Lopardo
State Street Global Advisors
Chairman and Chief Executive Officer
4 Annual Report
<PAGE>
SSgA Growth and Income Fund
- --------------------------------------------------------------------------------
Management of the Funds
- --------------------------------------------------------------------------------
[PHOTO]
Nicholas A. Lopardo
Chairman and Chief Executive Officer
A Team Approach to Investment Management
Our investment strategies are the product of the combined experience of our
professional staff. Portfolio Managers work together to develop and enhance the
techniques that drive our investment processes. As a result, the portfolios we
manage benefit from the knowledge of the entire team.
Mr. L. Emerson Tuttle, CFA, Principal, is the portfolio manager primarily
responsible for investment decisions regarding the SSgA Growth and Income Fund,
and also provides investment management services for employee benefit plans and
endowments. Mr. Tuttle joined State Street in 1981, and has 20 years of
investment experience. From 1987 to 1989, Mr. Tuttle was portfolio manager of
Private Client Services at State Street Bank in Zurich, Switzerland. Mr. Tuttle
is a magna cum laude from Suffolk Law School. He is a member of the
Massachusetts Bar and the Boston Security Analysts Society. There are four other
portfolio managers working with Mr. Tuttle.
Annual Report 5
<PAGE>
SSgA Growth and Income Fund
- --------------------------------------------------------------------------------
Portfolio Management Discussion and Analysis
- --------------------------------------------------------------------------------
Objective: Achieve long-term capital growth, current income, and growth of
income.
Invests in: Equity securities.
Strategy: Fund Managers concentrate in securities with larger market
capitalizations, in a range of $1.2 billion to $490 billion. Stock selection
focuses on individual companies and the strength of their fundamental business
characteristics.
- --------------------------------------------------------------------------------
GROWTH OF A $10,000 INVESTMENT
Dates Growth and Income Fund S&P 500(R) Index**
Inception* $10,000 $10,000
1994 $10,623 $10,547
1995 $12,287 $12,809
1996 $13,954 $15,208
1997 $19,668 $21,391
1998 $21,818 $23,122
1999 $30,882 $32,330
================================================================================
Performance Review
For the fiscal year ended August 31, 1999, the SSgA Growth and Income Fund's
total return was 41.55%, compared to 39.84% for the S&P 500(R) Index. Fund
performance is net of operating expenses, whereas Index results do not include
expenses of any kind.
The Fund's positive results can be attributed to benchmark-relative overweight
positions in communications and technology companies, and from a shift during
first quarter 1999 to an overweight exposure in energy stocks. Among technology
stocks, Applied Materials (up 189%), EMC Corp. (up 169%), and Linear Technology
Corp. (up 168%) were the best performers. Leading the Fund's Communications
sector performance were MCI Worldcom (up 85%), MediaOne Group (up 59%), and
ALLTEL Corp. (up 51%). The Fund remains underweight versus the S&P 500 Index in
sectors of the market such as Basic Materials, Industrials, and Consumer
- --------------------------------------------------------------------------------
SSgA Growth and Income Fund
- --------------------------------------------------------------------------------
Period Ended Growth of Total
08/31/99 $10,000 Return
- -------------- ------------ -------
1 Year $ 14,155 41.55%
5 Years $ 29,069 23.79%+
Inception $ 30,882 20.68%+
- --------------------------------------------------------------------------------
Standard and Poor's(R) 500 Composite Stock Price Index
- --------------------------------------------------------------------------------
Period Ended Growth of Total
08/31/99 $10,000 Return
- -------------- ------------ -------
1 Year $ 13,984 39.84%
5 Years $ 30,311 25.11%+
Inception $ 32,330 21.60%+
See related Notes on following page.
6 Annual Report
<PAGE>
SSgA Growth and Income Fund
- --------------------------------------------------------------------------------
Portfolio Management Discussion and Analysis
- --------------------------------------------------------------------------------
Cyclicals, which are more sensitive to changes in the overall level of economic
activity.
Market and Portfolio Highlights
After retreating in early October 1998, to the lows reached at the end of a 19%
correction late in the previous fiscal year, the S&P 500 Index has rallied
strongly. This increase reflects a continuation of high consumer confidence, as
well as benign levels of inflation at both the producer and consumer levels.
Additionally, an easing of concerns about the economic health of developing
countries in South America and the Pacific Rim contributed to the positive
performance of the equity markets. While long Treasury interest rates are
currently almost a full percentage point higher than were seen one year earlier,
stock market investors appear confident that the Federal Reserve Board has been
proactive in raising short-term rates to prevent the economy from overheating.
The market's returns in the past year also clearly reflect the dominant
positions of technology and communications stocks, in not only the domestic
economy, but globally as well. The Technology sector of the S&P 500 Index
returned 98.9%, with the Communications sector of the Index gaining 45.2%.
Considering the total of eleven sectors within the S&P 500, only two others,
Energy and Capital Goods, outperformed the overall Index.
The Fund also benefited from its exposure to large, well-recognized companies
with brand name franchises. In the past four quarters, the earnings growth of
the largest 25 companies in the Index has exceeded that of the overall Index by
almost 20%, and their average price performance has been almost double that of
the Index; 15 of these issues were owned by the Fund during the year. Among
those holdings were Microsoft, Intel, and IBM, all constituents of the top ten
largest companies in the Index, and all up more than 120% for the year. Also
contributing to the Fund's performance were large cap issues such as Lucent
Technologies (up 81%), Royal Dutch Petroleum (up 55%), and Wal-Mart Stores (up
50%).
The Fund is well diversified, with exposure to all major sectors of the US
economy. The individual holdings are believed to have favorable long-term growth
prospects as well as being attractively valued at the present time. The
long-term investment horizon used in evaluating both market sectors and
individual securities has resulted in the distribution of only modest realized
capital gains.
- --------------------------------------------------------
Top Ten Equity Holdings
(as a percent of Total Investments) August 31, 1999
- --------------------------------------------------------
Lucent Technologies, Inc. 3.9%
Wells Fargo Co. 3.8
Pfizer, Inc. 3.8
Philip Morris Cos., Inc. 3.7
General Electric Co. 3.5
Automatic Data Processing, Inc. 3.4
Pharmacia & Upjohn, Inc. 3.2
Alltel Corp. 3.2
Wal-Mart Stores, Inc. 3.0
Linear Technology Corp. 3.0
- --------------------------------------------------------
---------------------
Notes: The following notes relate to the Growth of $10,000 graph and table on
the preceding page.
* The Growth and Income Fund commenced operations on September 1, 1993.
Index comparison also began on September 1, 1993.
** The Standard & Poor's(R) 500 Composite Stock Index is composed of 500
common stocks which are chosen by Standard & Poor's Corporation to best
capture the price performance of a large cross-section of the US publicly
traded stock market. The Index is structured to approximate the general
distribution of industries in the US economy.
+ Annualized.
Performance is historical and assumes reinvestment of all dividends and capital
gains. Investment return and principal value will fluctuate so that an
investor's shares, when redeemed, may be worth more or less than when purchased.
Past performance is not indicative of future results.
Annual Report 7
<PAGE>
Report of Independent Accountants
To the Shareholders and Board of Trustees
of the SSgA Funds:
In our opinion, the accompanying statement of assets and liabilities and
statement of net assets, and the related statements of operations and of changes
in net assets and the financial highlights present fairly, in all material
respects, the financial position of SSgA Growth and Income Fund (the "Fund") at
August 31, 1999, the results of its operations for the fiscal year then ended
and the changes in its net assets for each of the two fiscal years in the period
then ended, and the financial highlights for each of the five fiscal years in
the period then ended, in conformity with generally accepted accounting
principles. These financial statements and financial highlights (hereafter
referred to as "financial statements") are the responsibility of the Fund's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these financial
statements in accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of securities at August 31, 1999 by correspondence with the
custodian and brokers, provide a reasonable basis for the opinion expressed
above.
Boston, Massachusetts
October 11, 1999
/s/ PricewaterhouseCoopers LLP
8 Annual Report
<PAGE>
SSgA
Growth and Income Fund
Statement of Net Assets
August 31, 1999
Market
Number Value
of (000)
Shares $
------ ------
Common Stocks - 96.6%
Basic Industries - 3.6%
Illinois Tool Works, Inc. 111,000 8,651
Worthington Industries, Inc. 125,000 1,875
--------
10,526
--------
Capital Goods - 5.8%
Emerson Electric Co. 108,000 6,764
General Electric Co. 90,000 10,108
--------
16,872
--------
Consumer Basics - 17.4%
American Home Products Corp. 95,000 3,943
Bestfoods 136,000 6,681
Cardinal Health, Inc. 27,500 1,753
Corning, Inc. 30,000 1,995
Medtronic, Inc. 25,000 1,956
PepsiCo, Inc. 90,000 3,071
Pfizer, Inc. 295,000 11,136
Pharmacia & Upjohn, Inc. 180,000 9,405
Philip Morris Cos., Inc. 290,000 10,857
--------
50,797
--------
Consumer Durables - 0.6%
Lear Corp. (a) 45,000 1,808
--------
Consumer Non-Durables - 6.6%
Avon Products, Inc. 100,000 4,388
Dayton Hudson Corp. 83,000 4,814
Home Depot, Inc. (The) 20,000 1,223
Wal-Mart Stores, Inc. 200,000 8,862
--------
19,287
--------
Energy - 5.9%
Anadarko Petroleum Corp. 45,000 1,530
Atlantic Richfield Co. 68,000 5,980
Baker Hughes, Inc. 145,000 4,930
Burlington Resources, Inc. 75,000 3,136
Texaco, Inc. 25,000 1,587
--------
17,163
--------
Finance - 13.4%
Associates First Capital Corp. Class A 175,442 6,020
Bank of America Corp. 130,000 7,865
Capital One Financial Corp. 48,000 1,812
Mellon Bank Corp. 115,000 3,838
Price (T. Rowe) & Associates, Inc. 225,000 6,891
Wachovia Corp. 20,000 1,568
Wells Fargo Co. 280,000 11,147
--------
39,141
--------
General Business - 6.0%
Automatic Data Processing, Inc. 250,000 9,828
Comcast Corp. Special Class A 100,000 3,256
Ecolab, Inc. 40,000 1,503
MediaOne Group, Inc. (a) 46,500 3,057
--------
17,644
--------
Technology - 23.9%
Applied Materials, Inc. (a) 68,000 4,828
Avery Dennison Corp. 80,000 4,390
Cisco Systems, Inc. (a) 45,000 3,049
EMC Corp. (a) 130,000 7,800
Intel Corp. 80,000 6,575
International Business Machines Corp. 45,000 5,605
Annual Report 9
<PAGE>
SSgA
Growth and Income Fund
Statement of Net Assets, continued
August 31, 1999
Market
Number Value
of (000)
Shares $
------ ------
Linear Technology Corp. 138,600 8,714
Lucent Technologies, Inc. 177,000 11,339
Microsoft Corp. (a) 83,000 7,678
Motorola, Inc. 50,000 4,613
Solectron Corp. (a) 65,000 5,086
--------
69,677
--------
Transportation - 0.9%
Burlington Northern, Inc. 85,000 2,465
--------
Utilities - 12.5%
Alltel Corp. 137,000 9,265
AT&T Corp. 141,000 6,345
Duke Energy Corp. 143,000 8,223
Edison International 35,000 888
FPL Group, Inc. 25,000 1,350
MCI WorldCom, Inc. (a) 90,000 6,811
VoiceStream Wireless Corp. NPV (a) 90,000 3,689
--------
36,571
--------
Total Common Stocks
(cost $260,310) 281,951
--------
Short-Term Investments - 3.0%
AIM Short Term Investment Prime Portfolio (b) 4,639 4,639
Federated Government Obligations Fund (b) 4,049 4,049
--------
Total Short-Term Investments
(cost $8,688) 8,688
--------
Total Investments - 99.6%
(identified cost $268,998) 290,639
Other Assets and Liabilities,
Net - 0.4% 1,077
--------
Net Assets - 100.0% 291,716
========
(a) Nonincome-producing security.
(b) At cost, which approximates market.
Abbreviations:
NPV - No Par Value
See the accompanying notes which are an integral part of the financial
statements.
10 Annual Report
<PAGE>
SSgA
Growth and Income Fund
Statement of Assets and Liabilities
Amounts in thousands (except per share amount) August 31, 1999
<TABLE>
<S> <C> <C>
Assets
Investments at market (identified cost $268,998) ....................................... $ 290,639
Receivables:
Dividends ........................................................................... 489
Investments sold .................................................................... 3,099
Fund shares sold .................................................................... 4,287
Short-term investments held as collateral for securities loaned, at market ............ 1,101
----------
Total Assets ..................................................................... 299,615
Liabilities
Payables:
Investments purchased ............................................... $ 6,137
Fund shares redeemed ................................................ 121
Accrued fees to affiliates .......................................... 523
Other accrued expenses .............................................. 17
Payable upon return of securities loaned, at market ................... 1,101
----------
Total Liabilities ................................................................ 7,899
----------
Net Assets ............................................................................. $ 291,716
==========
Net Assets Consist of:
Undistributed net investment income .................................................... $ 280
Accumulated net realized gain (loss) ................................................... 12,623
Unrealized appreciation (depreciation) on investments .................................. 21,641
Shares of beneficial interest .......................................................... 13
Additional paid-in capital ............................................................. 257,159
----------
Net Assets ............................................................................. $ 291,716
==========
Net Asset Value, offering and redemption price per share:
($291,716,474 divided by 12,950,786 shares of $.001 par value
shares of beneficial interest outstanding) ....................................... $ 22.53
==========
</TABLE>
See the accompanying notes which are an integral part of the financial
statements.
Annual Report 11
<PAGE>
SSgA
Growth and Income Fund
Statement of Operations
Amounts in thousands For the Fiscal Year Ended August 31, 1999
<TABLE>
<S> <C> <C>
Investment Income
Dividends (net of foreign taxes withheld of $15) ............................ $ 3,245
Interest .................................................................... 48
----------
Total Investment Income .................................................. 3,293
Expenses
Advisory fees ................................................. $ 1,944
Administrative fees ........................................... 71
Custodian fees ................................................ 45
Distribution fees ............................................. 146
Transfer agent fees ........................................... 47
Professional fees ............................................. 5
Registration fees ............................................. 51
Shareholder servicing fees .................................... 210
Trustees' fees ................................................ 5
Miscellaneous ................................................. 5
----------
Expenses before reductions .................................... 2,529
Expense reductions ............................................ (163)
----------
Expenses, net ............................................................ 2,366
----------
Net investment income .......................................................... 927
----------
Net Realized and Unrealized Gain (Loss)
Net realized gain (loss) on investments ........................................ 41,787
Net change in unrealized appreciation (depreciation) on investments ............ 9,643
----------
Net realized and unrealized gain (loss) ........................................ 51,430
----------
Net increase (decrease) in net assets resulting from operations ................ $ 52,357
==========
</TABLE>
See the accompanying notes which are an integral part of the financial
statements.
12 Annual Report
<PAGE>
SSgA
Growth and Income Fund
Statement of Changes in Net Assets
Amounts in thousands For the Fiscal Years Ended August 31,
<TABLE>
<CAPTION>
1999 1998
---------- ----------
<S> <C> <C>
Increase (Decrease) in Net Assets
Operations
Net investment income ................................................ $ 927 $ 563
Net realized gain (loss) ............................................. 41,787 16,224
Net change in unrealized appreciation (depreciation) ................. 9,643 (12,525)
---------- ----------
Net increase (decrease) in net assets resulting from operations ... 52,357 4,262
---------- ----------
Distributions
From net investment income ........................................... (813) (530)
From net realized gain on investments ................................ (16,521) (7,384)
---------- ----------
Net decrease from distributions ................................... (17,334) (7,914)
---------- ----------
Share Transactions
Net increase (decrease) in net assets from share transactions ........ 145,067 43,542
---------- ----------
Total Net Increase (Decrease) in Net Assets ............................. 180,090 39,890
Net Assets
Beginning of period .................................................. 111,626 71,736
---------- ----------
End of period (including undistributed net investment income of
$280 and $166, respectively) ...................................... $ 291,716 $ 111,626
========== ==========
</TABLE>
See the accompanying notes which are an integral part of the financial
statements.
Annual Report 13
<PAGE>
SSgA
Growth and Income Fund
Financial Highlights
The following table includes selected data for a share outstanding throughout
each period and other performance information derived from the financial
statements.
<TABLE>
<CAPTION>
Fiscal Years Ended August 31,
------------------------------------------------------------------
1999 1998 1997 1996 1995
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period ............ $ 18.10 $ 18.08 $ 13.36 $ 11.95 $ 10.51
---------- ---------- ---------- ---------- ----------
Income From Operations
Net investment income (a) .................... .09 .11 .12 .15 .18
Net realized and unrealized gain (loss) ...... 6.79 1.83 5.18 1.46 1.44
---------- ---------- ---------- ---------- ----------
Total Income From Operations .............. 6.88 1.94 5.30 1.61 1.62
---------- ---------- ---------- ---------- ----------
Distributions
From net investment income ................... (.09) (.11) (.14) (.16) (.18)
From net realized gain on investments ........ (2.36) (1.81) (.44) (.04) --
---------- ---------- ---------- ---------- ----------
Total Distributions ....................... (2.45) (1.92) (.58) (.20) (.18)
---------- ---------- ---------- ---------- ----------
Net Asset Value, End of Period .................. $ 22.53 $ 18.10 $ 18.08 $ 13.36 $ 11.95
========== ========== ========== ========== ==========
Total Return (%) ................................ 41.55 10.93 40.95 13.57 15.66
Ratios/Supplemental Data:
Net Assets, end of period ($ in thousands) ... 291,716 111,626 71,736 55,823 43,884
Ratios to average net assets (%):
Operating expenses, net (b) ............... 1.03 .95 .95 .95 .95
Operating expenses, gross (b) ............. 1.11 1.14 1.21 1.40 1.61
Net investment income ..................... .41 .57 .82 1.15 1.72
Portfolio turnover rate (%) .................. 72.27 66.44 29.88 38.34 39.32
</TABLE>
(a) For the period subsequent to August 31, 1998, average month-end shares
outstanding were used for this calculation.
(b) See Note 4 for current period amounts.
14 Annual Report
<PAGE>
SSgA
Growth and Income Fund
Notes to Financial Statements
August 31, 1999
1. Organization
The SSgA Funds (the "Investment Company") is a series mutual fund,
currently comprised of 23 investment portfolios which are in operation as
of August 31, 1999. These financial statements report on one portfolio,
the SSgA Growth and Income Fund (the "Fund"). The Investment Company is a
registered and diversified open-end investment company, as defined in the
Investment Company Act of 1940, as amended (the "1940 Act"), that was
organized as a Massachusetts business trust on October 3, 1987 and
operates under a First Amended and Restated Master Trust Agreement, dated
October 13, 1993, as amended (the "Agreement"). The Investment Company's
Agreement permits the Board of Trustees to issue an unlimited number of
full and fractional shares of beneficial interest at a $.001 par value.
2. Significant Accounting Policies
The Fund's financial statements are prepared in accordance with generally
accepted accounting principles which require the use of management
estimates. The following is a summary of the significant accounting
policies consistently followed by the Fund in the preparation of its
financial statements.
Security valuation: United States equity securities listed and traded
principally on any national securities exchange are valued on the basis of
the last sale price or, lacking any sale, at the closing bid price, on the
primary exchange on which the security is traded. United States
over-the-counter equities are valued on the basis of the closing bid
price.
International securities traded on a national securities exchange are
valued on the basis of the last sale price. International securities
traded over the counter are valued on the basis of the mean of bid prices.
In the absence of a last sale or mean bid price, respectively, such
securities may be valued on the basis of prices provided by a pricing
service if those prices are believed to reflect the market value of such
securities.
Money market instruments maturing within 60 days of the valuation date are
valued at amortized cost, a method by which each portfolio instrument is
initially valued at cost, and thereafter a constant accretion/amortization
to maturity of any discount or premium is assumed, unless the Board of
Trustees determines that amortized cost does not represent fair value.
The Fund may value securities for which market quotations are not readily
available at "fair value," as determined in good faith pursuant to
procedures established by the Board of Trustees.
Securities transactions: Securities transactions are recorded on a trade
date basis. Realized gains and losses from securities transactions are
recorded on the basis of identified cost.
Investment income: Dividend income is recorded on the ex-dividend date and
interest income is recorded daily on the accrual basis.
Amortization and accretion: All zero-coupon bond discounts and original
issue discounts are accreted for both tax and financial reporting
purposes. All short- and long-term market premiums/discounts are
amortized/accreted for both tax and financial reporting purposes.
Federal income taxes: Since the Investment Company is a Massachusetts
business trust, each fund is a separate corporate taxpayer and determines
its net investment income and capital gains (or losses) and the amounts to
be
Annual Report 15
<PAGE>
SSgA
Growth and Income Fund
Notes to Financial Statements, continued
August 31, 1999
distributed to each fund's shareholders without regard to the income and
capital gains (or losses) of the other funds.
It is the Fund's intention to qualify as a regulated investment company,
as defined by the Internal Revenue Code of 1986, as amended. This requires
the Fund to distribute all of its taxable income. Therefore, the Fund paid
no federal income taxes and no federal income tax provision was required.
The Fund's aggregate cost of investments and the composition of unrealized
appreciation and depreciation of investment securities for federal income
tax purposes as of August 31, 1999 are as follows:
Net Unrealized
Federal Tax Unrealized Unrealized Appreciation
Cost Appreciation (Depreciation) (Depreciation)
------------ ------------ ------------- -------------
$269,498,135 $ 29,803,708 $ (8,662,345) $ 21,141,363
Dividends and distributions to shareholders: Income dividends and capital
gain distributions, if any, are recorded on the ex-dividend date.
Dividends are generally declared and paid quarterly. Capital gain
distributions are generally declared and paid annually. An additional
distribution may be paid by the Fund to avoid imposition of federal income
tax on any remaining undistributed net investment income and capital
gains.
The timing and characterization of certain income and capital gain
distributions are determined in accordance with federal tax regulations
which may differ from generally accepted accounting principles ("GAAP").
As a result, net investment income and net realized gain (or loss) from
investment transactions for a reporting period may differ significantly
from distributions during such period. The differences between tax
regulations and GAAP relate primarily to investments in certain securities
sold at a loss. Accordingly, the Fund may periodically make
reclassifications among certain of its capital accounts without impacting
its net asset value.
Expenses: Most expenses can be directly attributed to the Fund. Expenses
which cannot be directly attributed are allocated among all funds based
principally on their relative net assets.
3. Securities Transactions
Investment transactions: For the year ended August 31, 1999, purchases and
sales of investment securities, excluding short-term investments,
aggregated to $278,789,735, and $159,257,842, respectively. In-kind
redemption resulted in a gain of $28,867,323.
Securities Lending: Effective December 17, 1998, the Investment Company
started its securities lending program. The program allows each Fund to
loan securities with a value up to 33 1/3% of its total assets to certain
brokers. The Fund receives cash (U.S. currency), U.S. Government or U.S.
Government agency obligations as collateral against the loaned securities.
To the extent that a loan is secured by cash collateral, such collateral
shall be invested by State Street Bank and Trust Company in short-term
instruments, money market mutual funds, and such other short-term
investments, provided the investments meet certain quality and
diversification requirements. Under the securities lending arrangement,
the collateral received is recorded on the Fund's statement of assets and
liabilities along with the related obligation to return the collateral. In
those situations where the Company has
16 Annual Report
<PAGE>
SSgA
Growth and Income Fund
Notes to Financial Statements, continued
August 31, 1999
relinquished control of securities transferred, it derecognizes the
securities and records a receivable from the counterparty.
Income generated from the investment of cash collateral, less negotiated
rebate fees paid to participating brokers and transaction costs, is
divided between the Fund and State Street Bank and Trust Company and is
recorded as interest income for the Fund. To the extent that a loan is
secured by non-cash collateral, brokers pay the Fund negotiated lenders'
fees, which are divided between the Fund and State Street Bank and Trust
Company and are recorded as interest income for the Fund. All collateral
received will be in an amount at least equal to 102% (for loans of U.S.
securities) or 105% (for non-U.S. securities) of the market value of the
loaned securities at the inception of each loan. Should the borrower of
the securities fail financially, there is a risk of delay in recovery of
the securities or loss of rights in the collateral. Consequently, loans
are made only to borrowers which are deemed to be of good financial
standing. As of August 31, 1999, the value of outstanding securities on
loan and the value of collateral amounted to $1,064,498 and $1,101,056,
respectively. The Fund recorded securities lending income of $12,585
during the year.
4. Related Parties
Adviser: The Investment Company has an investment advisory agreement with
State Street Bank and Trust Company under which the Adviser directs the
investments of the Fund in accordance with its investment objectives,
policies, and limitations. For these services, the Fund pays a fee to the
Adviser, calculated daily and paid monthly, at the annual rate of .85% of
its average daily net assets. For the period September 1, 1998 to December
31 1998, the Adviser voluntarily agreed to reimburse the Fund for all
expenses in excess of .95% of average daily net assets on an annual basis.
As of January 1, 1999, the Adviser voluntarily agreed to reimburse the
Fund for all expenses in excess of 1.10% of average daily net asset on an
annual basis. As of August 31, 1999, the receivable due from the Adviser
for expenses in excess of the expense cap has been netted against the
Advisory fee payable. The Investment Company also has contracts with the
Adviser to provide custody, shareholder servicing and transfer agent
services to the Fund. These amounts are presented in the accompanying
Statement of Operations.
In addition, the Fund has entered into arrangements with its Adviser
whereby credits realized as a result of uninvested cash balances were used
to reduce a portion of the Fund's expenses. During the period, the Fund's
custodian fees were reduced by $795 under these arrangements.
Administrator: The Investment Company has an administration agreement with
Frank Russell Investment Management Company (the "Administrator"), a
wholly owned subsidiary of The Northwestern Mutual Life Insurance Company,
under which the Administrator supervises all non-portfolio investment
aspects of the Investment Company's operations and provides adequate
office space and all necessary office equipment and services, including
telephone service, utilities, stationery supplies, and similar items. The
Investment Company pays the Administrator the following fees for services
supplied by the Administrator pursuant to the Administration Agreement:
(i) an annual fee, payable monthly on a pro rata basis, based on the
following percentages of the combined average daily net assets of all
domestic funds: $0 up to and including $500 million - .06%; over $500
million to and including $1 billion - .05%; over $1 billion - .03%, and
(ii) less an amount equal to the sum of certain distribution-related
expenses incurred by the Investment Company's Distributor on behalf of the
Fund (up to a maximum of 10%, for the period September 1, 1997 to December
31, 1997, up to a maximum of 5%
Annual Report 17
<PAGE>
SSgA
Growth and Income Fund
Notes to Financial Statements, continued
August 31, 1999
for the period January 1, 1998 to December 31, 1998 and 0% thereafter, of
the asset-based fee determined in (i)). In addition, the Fund reimburses
the Administrator for out-of-pocket expenses and start-up costs for new
funds.
Distributor and Shareholder Servicing: The Investment Company has a
Distribution Agreement with Russell Fund Distributors (the "Distributor")
which is a wholly-owned subsidiary of the Administrator to promote and
offer shares of the Investment Company. The Distributor may enter into
sub-distribution agreements with other non-related parties. The amounts
paid to the Distributor are included in the accompanying Statement of
Operations.
The Investment Company has a Distribution Plan pursuant to Rule 12b-1 (the
"Plan") under the 1940 Act. Under this Plan, the Investment Company is
authorized to make payments to the Distributor, or any Shareholder
Servicing Agent, as defined in the Plan, for providing distribution and
marketing services, for furnishing assistance to investors on an ongoing
basis, and for the reimbursement of direct out-of-pocket expenses charged
by the Distributor in connection with the distribution and marketing of
shares of the Investment Company and the servicing of investor accounts.
The Fund has service agreements with the Adviser, State Street Brokerage
Services, Inc. ("SSBSI"), a wholly-owned subsidiary of the Adviser, the
Adviser's Retirement Investment Services Division ("RIS"), the Adviser's
Metropolitan Division of Commercial Banking ("Commercial Banking") and
State Street Solutions ("Solutions")(collectively the "Agents"), as well
as several unaffiliated service providers. For these services, the Fund
pays .025%, .175%, .175%, .175%, and .175% to the Adviser, SSBSI, RIS,
Commercial Banking, and Solutions, respectively, based upon the average
daily value of all Fund shares held by or for customers of these Agents.
For the year ended August 31, 1999, the Fund was charged shareholder
servicing expenses of $57,188, $10,587, $9,274, $5,578 and $119,839 by the
Adviser, SSBSI, RIS, Commercial Banking, and Solutions, respectively.
The combined distribution and shareholder servicing payments shall not
exceed .25% of the average daily value of net assets on an annual basis.
The shareholder servicing payments shall not exceed .20% of the average
daily value of net assets on an annual basis. Any payments that exceed the
maximum amount of allowable reimbursement may be carried forward for two
years following the year in which the expenditure was incurred so long as
the plan is in effect. The Fund's responsibility for any such expenses
carried forward shall terminate at the end of two years following the year
in which the expenditure was incurred. The Trustees or a majority of the
Fund's shareholders have the right, however, to terminate the Distribution
Plan and all payments thereunder at any time. The Fund will not be
obligated to reimburse the Distributor for carryover expenses subsequent
to the Distribution Plan's termination or noncontinuance. There were no
carryover expenses as of August 31, 1999.
Affiliated Brokerage: The Fund placed a portion of its portfolio
transactions with SSBSI, an affiliated broker dealer of the Fund's
Adviser. The commissions paid to SSBSI were $220,657, for the year ended
August 31, 1999.
18 Annual Report
<PAGE>
SSgA
Growth and Income Fund
Notes to Financial Statements, continued
August 31, 1999
Board of Trustees: Through May 31, 1999, the Investment Company paid each
Trustee not affiliated with the Investment Company a retainer of $48,000
annually, $1,500 for each board meeting attended, an additional $1,500 for
attending the annual audit committee meeting, and reimbursement for
out-of-pocket expenses. As of June 1, 1999, each Trustee receives $2,500
for each board meeting attended, an additional $2,500 for attending the
annual audit committee meeting and $2,500 for the valuation committee fee
in addition to the $48,000 annual retainer. These expenses are allocated
among all of the Funds based upon their relative net assets.
Accrued fees payable to affiliates and trustees as of August 31, 1999 were
as follows:
Advisory fees $474,684
Administration fees 7,823
Custodian fees 1,970
Distribution fees 4,547
Shareholder servicing fees 30,733
Transfer agent fees 2,713
Trustees' fees 823
--------
$523,293
========
Beneficial Interest: As of August 31, 1999, one shareholder (who is also
an affiliate of the Investment Company) was a record owner of
approximately 38% of the total outstanding shares of the Fund.
5. Fund Share Transactions (amounts in thousands)
<TABLE>
<CAPTION>
Fiscal Years Ended August 31,
----------------------------------------------------
1999 1998
------------------------ ------------------------
Shares Dollars Shares Dollars
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Proceeds from shares sold ...................... 11,203 $ 241,058 2,967 $ 59,090
Proceeds from reinvestment of distributions .... 900 16,164 429 7,666
Payments for shares redeemed ................... (5,320) (112,155) (1,196) (23,214)
---------- ---------- ---------- ----------
Total net increase (decrease) .................. 6,783 $ 145,067 2,200 $ 43,542
========== ========== ========== ==========
</TABLE>
Annual Report 19
<PAGE>
SSgA
Growth and Income Fund
Notes to Financial Statements, continued
August 31, 1999
6. Line of Credit
The Fund and several affiliated Funds (the "Participants") share in a $50
million revolving credit facility for temporary or emergency purposes,
including the meeting of redemption requests that otherwise might require
the untimely disposition of securities. The Participants are charged an
annual commitment fee of .09% (.065% prior to July 15, 1999) on the
average daily unused amount of the aggregate commitment, which is
allocated among each of the Participants. Interest, at the Federal Fund
Rate plus .50% annually, is calculated based on the market rates at the
time of the borrowing. The Fund may borrow up to a maximum of 33 1/3
percent of the value of its net assets under the agreement. The Fund did
not have any drawdowns during the year.
7. Dividends
On September 1, 1999, the Board of Trustees declared a dividend of $.0215
from net investment income, payable on September 7, 1999 to shareholders
of record on September 2, 1999.
20 Annual Report
<PAGE>
SSgA
Growth and Income Fund
Tax Information
August 31, 1999 (Unaudited)
The Funds paid distributions of $16,245,021 from net long-term capital gains
during its taxable year ended August 31, 1999.
Please consult a tax advisor for questions about federal or state income tax
laws.
Annual Report 21
<PAGE>
SSgA Growth and Income Fund
One International Place, 27th Floor
Boston, Massachusetts 02110
(800) 997-7327
- --------------------------------------------------------------------------------
Trustees
Lynn L. Anderson, Chairman
William L. Marshall
Steven J. Mastrovich
Patrick J. Riley
Richard D. Shirk
Bruce D. Taber
Henry W. Todd
Officers
Lynn L. Anderson, President, Treasurer and CEO
Mark E. Swanson, Assistant Secretary, Assistant
Treasurer and Principal Accounting Officer
J. David Griswold, Vice President and Secretary
Deedra S. Walkey, Assistant Secretary
Rick J. Chase, Assistant Secretary
Carla L. Anderson, Assistant Secretary
Investment Adviser
State Street Bank and Trust Company
225 Franklin Street
Boston, Massachusetts 02110
Custodian, Transfer Agent and
Office of Shareholder Inquiries
State Street Bank and Trust Company
1776 Heritage Drive
North Quincy, Massachusetts 02171
(800) 647-7327
Distributor
Russell Fund Distributors, Inc.
One International Place, 27th Floor
Boston, Massachusetts 02110
(800) 997-7327
Administrator
Frank Russell Investment Management Company
909 A Street
Tacoma, Washington 98402
Legal Counsel
Goodwin, Procter & Hoar LLP
Exchange Place
Boston, Massachusetts 02109
Independent Accountants
PricewaterhouseCoopers LLP
160 Federal Street
Boston, Massachusetts 02110
22 Annual Report
<PAGE>
SSgA(R) Funds
Intermediate Fund
Annual Report
August 31, 1999
Table of Contents
Page
Chairman's Letter............................................. 4
Portfolio Management Discussion and Analysis.................. 6
Report of Independent Accountants............................. 8
Financial Statements.......................................... 9
Financial Highlights.......................................... 16
Notes to Financial Statements................................. 17
Tax Information............................................... 23
Fund Management and Service Providers......................... 24
"SSgA(R)" is a registered trademark of State Street Corporation and is licensed
for use by the SSgA Funds.
This report is prepared from the books and records of the Fund and it is
submitted for the general information of shareholders. This information is for
distribution to prospective investors only when preceded or accompanied by a
SSgA Funds Prospectus containing more complete information concerning the
investment objective and operations of the Fund, charges and expenses. The
Prospectus should be read carefully before an investment is made.
Performance is historical and assumes reinvestment of all dividends and capital
gains. Investment return and principal value will fluctuate so that an
investor's shares, when redeemed, may be worth more or less than when purchased.
Past performance is not indicative of future results. Russell Fund Distributors,
Inc., is the distributor of the SSgA Funds.
<PAGE>
SSgA Intermediate Fund
- --------------------------------------------------------------------------------
Letter From the Chairman of State Street Global Advisors
- --------------------------------------------------------------------------------
Dear Shareholders,
It is my pleasure to provide you with the SSgA Funds annual report for the
fiscal year ended August 31, 1999. The SSgA Fund family has grown to include
twenty-three portfolios covering a broad range of investment strategies. The
enclosed information provides an overview of the investment process for the SSgA
Intermediate Fund. This overview contains market updates, performance, and
financial information for the Fund. I hope you will find this information a
useful reference as you review your investment strategy.
During the past fiscal year, the SSgA Fund family has opened two new Funds. The
names and investment objectives for these funds are as follows:
The SSgA Aggressive Equity Fund seeks to maximize total return through investing
in US equity securities that are undervalued relative to their growth potential
as measured by SSgA's proprietary models.
The SSgA IAM Shares Fund seeks to maximize total return by investing primarily
in equity securities of companies that have entered into collective bargaining
agreements with the International Association of Machinists and Aerospace
Workers or affiliated labor unions.
Additionally, three SSgA Funds achieved a five-year track record during the 1999
fiscal year. These funds include the two institutional money market funds, SSgA
US Treasury and SSgA Prime Money Market Funds and the SSgA Emerging Markets
Fund. We are proud of our long-term record and look forward to having additional
funds complete their five-year anniversary.
In today's complex global marketplace, we are continually researching new
products and ideas to introduce to our fund family. Here at SSgA, we are
committed to providing a wide range of competitive investment vehicles to
fulfill your investment needs.
I would like to thank you for choosing the SSgA Funds.
Sincerely,
/s/ Nicholas A. Lopardo
Nicholas A. Lopardo
State Street Global Advisors
Chairman and Chief Executive Officer
4 Annual Report
<PAGE>
SSgA Intermediate Fund
- --------------------------------------------------------------------------------
Management of the Funds
- --------------------------------------------------------------------------------
[PHOTO]
Nicholas A. Lopardo
Chairman and Chief Executive Officer
A Team Approach to Investment Management
Our investment strategies are the product of the combined experience of our
professional staff. Portfolio Managers work together to develop and enhance the
techniques that drive our investment processes. As a result, the portfolios we
manage benefit from the knowledge of the entire team.
Mr. John Kirby, Principal, has been the portfolio manager primarily responsible
for investment decisions regarding the SSgA Intermediate Fund since November
1995. Prior to joining State Street Bank in 1995, Mr. Kirby was an account
manager with Lowell, Blake & Associates. Prior to that he was a portfolio
manager with One Federal Asset Management, and an asset/liability risk
specialist at Cambridge Port Savings. He has a BA from Boston College and is a
CFA candidate. There are six other portfolio managers working with Mr.
Kirby.
Annual Report 5
<PAGE>
SSgA Intermediate Fund
- --------------------------------------------------------------------------------
Portfolio Management Discussion and Analysis
- --------------------------------------------------------------------------------
Objective: Maximize total return by investing in fixed income securities.
Invests in: Investment grade debt instruments including: US Government
Treasuries, agencies, corporate bonds, asset-backed securities, mortgage-backed
securities and CMBS.
Strategy: Fund managers make investment decisions to seek to exceed the return
of the Lehman Brothers Intermediate Government/Corporate Bond Index. The Fund
seeks to match the Index's duration at all times while adding value through
issue and sector selection.
- --------------------------------------------------------------------------------
GROWTH OF A $10,000 INVESTMENT
Dates Intermediate Fund Lehman Intermediate
Inception* $10,000 $10,000
1994 $9,658 $9,967
1995 $10,629 $10,911
1996 $11,066 $11,395
1997 $11,952 $12,357
1998 $12,985 $13,466
1999 $13,162 $13,763
================================================================================
Performance Review
For the year ended August 31, 1999, the SSgA Intermediate Bond Market Fund
returned 1.36% versus 2.20% for its benchmark, the Lehman Brothers Intermediate
Government/ Corporate Bond Index. Deviations from the benchmark were principally
due to payment of operating expenses by the Fund, whereas the benchmark does not
include expenses of any kind. The Fund seeks to outperform the Index by taking
active exposure to corporate and mortgage securities versus the benchmark.
During the last two months of the fiscal year, a period of time in which spreads
widened, the Fund was overweight in those two sectors relative to Treasuries.
The Fund does not actively seek interest rate risk. The primary source of risk
in the portfolio is from the Fund's sector over/ underweight versus the Index.
This risk profile is less volatile than one resulting from active duration
management. Over the past twelve months, the portfolio's tracking error versus
the Index fluctuated, as the sector weightings were reduced or increased in
response to changing market conditions.
- --------------------------------------------------------------------------------
SSgA Intermediate Fund
- --------------------------------------------------------------------------------
Period Ended Growth of Total
08/31/99 $10,000 Return
- -------------- ------------ -------
1 Year $ 10,136 1.36%
5 Year $ 13,630 6.39%+
Inception $ 13,162 4.69%+
- --------------------------------------------------------------------------------
Lehman Brothers Intermediate
Government/Corporate Bond Index
- --------------------------------------------------------------------------------
Period Ended Growth of Total
08/31/99 $10,000 Return
- -------------- ------------ -------
1 Year $ 10,220 2.20%
5 Year $ 13,809 6.67%+
Inception $ 13,763 5.47%+
See related Notes on following page.
6 Annual Report
<PAGE>
SSgA Intermediate Fund
- --------------------------------------------------------------------------------
Portfolio Management Discussion and Analysis
- --------------------------------------------------------------------------------
The interest rate environment was volatile during the fiscal year ended August
31, 1999. The Federal Reserve helped to alleviate the global liquidity crisis in
the second half of calendar 1998 by lowering the Federal Funds rate by 75 basis
points. Absent this crisis, it was widely perceived that the Fed was poised to
raise rates to curtail increasing US economic growth. This surprise turnaround,
coupled with a global flight- to-quality, created a significant decline in US
interest rates through early October 1998 that resulted in the yield on the 10-
year Treasury falling to a low of 4.15. Rates subsequently headed higher, with
the 10-year Treasury yielding 5.98% on August 31, 1999.
Portfolio and Market Highlights
The Fund was managed consistently with its objective to maximize total return by
investing in fixed income securities, including those represented by the Lehman
Brothers Intermediate Government/Corporate Bond Index. On August 31, 1999, the
Fund's duration matched the Index at 3.47 years.
In November 1998, the Fund moved to a slight overweighting in spread products
(asset classes that offer extra yield as compensation for their imbedded risks)
in order to take advantage of the increased risk premium associated with owning
corporate and mortgage securities. At that time, a core Corporate exposure was
opportunistically added in Industrial, Finance, and Yankee securities, with this
position subsequently refined to include a diversified list of issuers. These
Corporate sector and security selections enabled the portfolio to more closely
approximate the Lehman Intermediate Corporate Index. In May 1999, liquidity
diminished as a Federal Reserve Bank tightening bias caused a two-tier market to
develop, resulting in spreads widening and corporate debt cheapening. In an
effort to maximize what liquidity remained in the market, the Fund focused on
corporate bond issues that had support from the brokerage community. Also at
this time, mortgage spreads widened as a result of volatile Treasury yields and
increasing swap rates. Mortgage securities are not in the Lehman Intermediate
Government/Corporate Bond Index but they are held by the Fund for their
excellent yield and liquidity characteristics.
The current weightings of the Fund reflect a constructive outlook on the global
financial markets. The perceived risks in the fixed income markets seem to be
outweighed by the generous spreads currently being offered. Consequently, the
Fund continues to be overweight in corporate and mortgage- backed securities
relative to the Index.
- --------------------------------------------------------
Top Ten Issuers (as a percent of Total
Investments) August 31, 1999
- --------------------------------------------------------
United States Government Treasuries 20.4%
Federal National Mortgage Association 11.5
Federal Home Loan Bank 6.9
General Motors Acceptance Corp. 5.8
Ford Motor Credit Co. 2.8
Federal Home Loan Mortgage Corp. 2.5
AON Corp. 1.5
Enron Corp. 1.4
GTE Corp. 1.4
Associates First Capital 1.3
- --------------------------------------------------------
---------------------
Notes: The following notes relate to the Growth of $10,000 graph and table on
the preceding page.
* The Intermediate Fund commenced operations on September 1, 1993. Index
comparisons also began on September 1, 1993.
** The Lehman Brothers Intermediate Government/Corporate Bond Index is
composed of all bonds covered by the Lehman Brothers Government/Corporate
Bond Index with maturities between one and 9.99 years.
+ Annualized.
Performance is historical and assumes reinvestment of all dividends and capital
gains. Investment return and principal value will fluctuate so that an
investor's shares, when redeemed, may be worth more or less than when purchased.
Past performance is not indicative of future results.
Annual Report 7
<PAGE>
Report of Independent Accountants
To the Shareholders and Board of Trustees of the SSgA Funds:
In our opinion, the accompanying statement of assets and liabilities and
statement of net assets, and the related statements of operations and of changes
in net assets and the financial highlights present fairly, in all material
respects, the financial position of SSgA Intermediate Fund (the "Fund") at
August 31, 1999, the results of its operations for the fiscal year then ended
and the changes in its net assets for each of the two fiscal years in the period
then ended, and the financial highlights for each of the five fiscal years in
the period then ended, in conformity with generally accepted accounting
principles. These financial statements and financial highlights (hereafter
referred to as "financial statements") are the responsibility of the Fund's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these financial
statements in accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of securities at August 31, 1999 by correspondence with the
custodian and brokers, provide a reasonable basis for the opinion expressed
above.
Boston, Massachusetts
October 11, 1999
/s/ PricewaterhouseCoopers LLP
8 Annual Report
<PAGE>
SSgA
Intermediate Fund
Statement of Net Assets
August 31, 1999
Principal Market
Amount Value
(000) (000)
$ $
--------- ------
Long-Term Investments - 96.4%
Asset-Backed Securities - 4.3%
CIT RV Trust
Series 1996-B Class A2
6.400% due 02/15/07 96 95
Citibank Credit Card Master Trust I
Series 1998-6 Class A
5.850% due 04/10/03 830 823
Ford Credit Auto Loan Master Trust
Series 1996-1 Class A
5.500% due 02/15/03 370 365
Honda Automobile Lease Trust
Series 1999-A Class A5
6.650% due 07/15/05 350 350
MBNA Master Credit Card Trust
Series 1999-G Class A
6.350% due 12/15/06 300 295
Premier Automobile Trust
Series 1999-2 Class A3
5.490% due 02/10/03 1,000 986
USAA Auto Loan Grantor Trust
Series 1998-1 Class A
5.800% due 01/15/05 141 141
--------
3,055
--------
Corporate Bonds and Notes - 40.1%
Abitibi-Consolidated Finance
7.875% due 08/01/09 250 243
Alltel Corp.
6.650% due 01/15/08 500 481
American Financial Group, Inc.
7.125% due 04/15/09 115 106
Aon Corp.
6.900% due 07/01/04 1,200 1,185
Associates First Capital
7.375% due 08/15/01 1,000 1,013
AT&T Corp.
6.000% due 03/15/09 500 463
Banc One, Milwaukee, N.A.
6.625% due 04/15/03 500 493
BankBoston Corp. (MTN)
6.125% due 03/15/02 150 147
Branch Banking & Trust Co.
5.700% due 02/01/01 250 247
Burlington Northern Santa Fe
6.125% due 03/15/09 300 275
CIT Group, Inc. (MTN)
5.800% due 03/26/02 500 488
5.910% due 11/10/03 500 478
CMS Panhandle Holding Co.
6.500% due 07/15/09 100 92
Comcast Cable Communications
6.200% due 11/15/08 250 226
Conoco, Inc.
5.900% due 04/15/04 250 233
Continental Cablevision, Inc.
8.300% due 05/15/06 250 259
Dana Corp.
6.250% due 03/01/04 200 193
Delta Air Lines, Inc.
Series C (MTN)
6.650% due 03/15/04 100 97
Donaldson, Lufkin & Jenrette, Inc.
5.875% due 04/01/02 500 488
El Paso Energy Corp.
6.750% due 05/15/09 200 187
Enron Corp.
9.650% due 05/15/01 150 157
6.500% due 08/01/02 750 739
9.125% due 04/01/03 200 211
EOP Operating, L.P.
6.500% due 01/15/04 250 239
Equitable Cos., Inc.
9.000% due 12/15/04 250 270
Equitable Life Assurance Society
6.950% due 12/01/05 300 296
Annual Report 9
<PAGE>
SSgA
Intermediate Fund
Statement of Net Assets, continued
August 31, 1999
Principal Market
Amount Value
(000) (000)
$ $
--------- ------
Finova Capital Corp.
6.375% due 05/15/05 250 238
Firstar Corp.
6.350% due 07/13/01 500 497
Fleet National Bank
Series BKNT
5.750% due 01/15/09 500 444
Ford Motor Credit Co.
6.110% due 12/28/01 (MTN) 700 691
6.500% due 02/28/02 500 496
7.500% due 01/15/03 500 506
5.800% due 01/12/09 500 449
Gatx Capital Corp.
6.500% due 11/01/00 500 497
General Motors Acceptance Corp.
5.625% due 02/15/01 1,000 986
7.125% due 05/01/01 500 504
5.350% due 05/04/01 (MTN) 1,000 980
5.500% due 01/14/02 500 486
6.000% due 02/01/02 500 491
5.950% due 03/14/03 500 484
5.750% due 11/10/03 500 477
GTE Corp.
9.375% due 12/01/00 1,055 1,093
Harrahs Operating Co., Inc.
7.500% due 01/15/09 40 38
International Business Machines
Corp. (MTN)
5.250% due 12/01/03 500 472
International Paper Co.
7.625% due 01/15/07 250 252
J Seagram & Sons, Inc.
5.790% due 04/15/01 500 492
Jones Intercable, Inc.
8.875% due 04/01/07 250 267
Kemper Corp.
6.875% due 09/15/03 500 495
Kroger Co.
6.375% due 03/01/08 250 230
Lehman Brothers Holdings, Inc.
6.625% due 04/01/04 100 97
Series E (MTN)
6.375% due 03/15/01 250 248
Mack-Cali Realty L.P.
7.000% due 03/15/04 500 484
MCI WorldCom, Inc.
6.125% due 08/15/01 500 495
6.400% due 08/15/05 360 346
Mellon Financial Co.
5.750% due 11/15/03 500 474
Midamerican Funding LLC
6.339% due 03/01/09 150 142
Morgan Stanley Dean Witter & Co.
(MTN)
5.625% due 01/20/04 500 473
News America Holdings
7.375% due 10/17/08 200 194
Niagara Mohawk Power Corp.
7.750% due 10/01/08 250 250
Occidental Petroleum Corp.
7.375% due 11/15/08 300 292
Paine Webber Group, Inc.
6.375% due 05/15/04 500 481
Raytheon Co.
5.950% due 03/15/01 500 496
5.700% due 11/01/03 300 287
Rohm & Haas Co.
6.950% due 07/15/04 250 249
Saks, Inc.
8.250% due 11/15/08 600 595
Salomon, Inc.
7.250% due 05/01/01 250 252
Simon Property Group, Inc.
7.125% due 02/09/09 150 138
Sola International, Inc.
6.875% due 03/15/08 100 88
Time Warner, Inc.
8.180% due 08/15/07 552 575
10 Annual Report
<PAGE>
SSgA
Intermediate Fund
Statement of Net Assets, continued
August 31, 1999
Principal Market
Amount Value
(000) (000)
$ $
--------- ------
TRW, Inc.
6.450% due 06/15/01 500 498
USA Waste Services, Inc.
6.500% due 12/15/02 500 464
Vastar Resources, Inc.
6.500% due 04/01/09 250 237
--------
28,726
--------
Eurodollar Bonds - 7.1%
Alberta, Province of
4.875% due 10/29/03 300 281
Cable & Wireless Optus, Ltd.
8.125% due 06/15/09 300 300
Chile, Republic of
6.875% due 04/28/09 200 186
Hyder PLC
6.750% due 12/15/04 1,000 965
Korea Development Bank
7.125% due 04/22/04 470 450
Korea, Republic of
8.750% due 04/15/03 350 357
8.875% due 04/15/08 120 123
Ontario, Province of
7.375% due 01/27/03 500 510
Quebec, Province of Canada
5.750% due 02/15/09 500 452
Telekomunikacja Polska SA
7.125% due 12/10/03 550 537
7.750% due 12/10/08 30 29
Toyota Motor Credit Corp.
5.625% due 11/13/03 400 382
Xerox Capital Europe plc
5.750% due 05/15/02 500 486
--------
5,058
--------
Mortgage-Backed Securities - 9.9%
COMM
Series 1999-1 Class A2
6.455% due 09/15/08 1,000 935
Federal Home Loan Mortgage Corp.
Participation Certificate
4.500% due 2001 332 319
6.500% due 2029 493 467
Federal National Mortgage Association
6.000% due 2009 398 383
5.500% due 2014 253 235
Federal National Mortgage Association (a)
6.000% 30 Year TBA 1,500 1,380
6.500% 30 Year TBA 625 592
7.000% 30 Year TBA 1,800 1,747
7.500% 30 Year TBA 600 596
Nationslink Funding Corp.
Series 1999-1 Class A2
6.316% due 11/20/08 500 466
--------
7,120
--------
United States Government
Agencies - 8.8%
Federal Home Loan Bank
7.310% due 06/16/04 500 512
6.995% due 04/02/07 300 300
Federal Home Loan Mortgage Corp.
5.950% due 01/19/06 500 478
5.750% due 03/15/09 738 679
Federal National Mortgage Association
5.250% due 01/15/03 3,500 3,378
5.875% due 04/23/04 100 96
6.400% due 05/14/09 400 378
Annual Report 11
<PAGE>
SSgA
Intermediate Fund
Statement of Net Assets, continued
August 31, 1999
Principal Market
Amount Value
(000) (000)
$ $
--------- ------
State of Israel, United States
Government Guaranteed Notes
Series 7-B
5.700% due 02/15/03 500 487
--------
6,308
--------
United States Government
Treasuries - 21.9%
United States Treasury Bonds
10.000% due 05/15/10 320 375
12.000% due 08/15/13 450 619
United States Treasury Notes
5.500% due 08/31/01 4,750 4,729
6.125% due 12/31/01 2,950 2,969
6.250% due 02/28/02 500 505
6.250% due 06/30/02 500 505
5.750% due 12/31/02 890 883
5.500% due 05/31/03 200 197
6.000% due 08/15/04 960 965
6.500% due 08/15/05 260 265
5.875% due 11/15/05 200 198
6.875% due 05/15/06 1,500 1,558
3.875% due 01/15/09 1,000 986
6.000% due 08/15/09 865 867
--------
15,621
--------
Yankee Bonds - 4.3%
AT&T Canada, Inc.
12.000% due 08/15/07 500 568
Banco Santiago SA
7.000% due 07/18/07 100 85
Canadian National Railroad
6.625% due 05/15/03 500 494
Ireland, Republic of
7.125% due 07/15/02 600 609
Manitoba, Province of
Series CK
9.000% due 12/15/00 500 516
Royal Caribbean Cruises, Ltd.
6.750% due 03/15/08 100 92
Svenska Handelsbanken
8.350% due 07/15/04 200 211
Tyco International Group SA
6.125% due 06/15/01 500 493
--------
3,068
--------
Total Long-Term Investments
(cost $70,779) 68,956
--------
Short-Term Investments - 10.5%
Dreyfus Cash Management Plus, Inc.
Money Market Fund (b) 332 332
Federal Home Loan Bank Discount
Notes
5.080% due 09/15/99 (b)(c) 4,500 4,491
Federated Investors Prime Cash
Obligations Fund (b) 2,688 2,688
--------
Total Short-Term Investments
(cost $7,511) 7,511
--------
Total Investments - 106.9%
(identified cost $78,290) 76,467
Other Assets and Liabilities,
Net - (6.9%) (4,917)
--------
Net Assets - 100.0% 71,550
========
(a) Forward commitment.
(b) At cost, which approximates market.
(c) Rate noted is yield to maturity (Unaudited).
Abbreviations:
MTN - Medium Term Notes
TBA - To Be Announced Security
See the accompanying notes which are an integral part of the financial
statements.
12 Annual Report
<PAGE>
SSgA
Intermediate Fund
Statement of Asset and Liabilities
Amounts in thousands (except per share amount) August 31, 1999
<TABLE>
<S> <C> <C>
Assets
Investments at market (identified cost $78,290) ............................. $ 76,467
Receivables:
Dividends and interest ................................................... 892
Investments sold (delayed settlement) .................................... 1,244
Fund shares sold ......................................................... 134
---------
Total Assets .......................................................... 78,737
Liabilities
Payables:
Investments purchased (regular settlement) .................... $ 1,494
Investments purchased (delayed settlement) .................... 5,516
Fund shares purchased ......................................... 97
Accrued fees to affiliates .................................... 62
Other accrued expenses ........................................ 18
--------
Total Liabilities ..................................................... 7,187
---------
Net Assets .................................................................. $ 71,550
=========
Net Assets Consist of:
Undistributed net investment income ......................................... $ 992
Accumulated distributions in excess of net realized gain .................... (513)
Unrealized appreciation (depreciation) on investments ....................... (1,823)
Shares of beneficial interest ............................................... 8
Additional paid-in capital .................................................. 72,886
---------
Net Assets .................................................................. $ 71,550
=========
Net Asset Value, offering and redemption price per share:
($71,550,333 divided by 7,526,178 shares of $.001 par value
shares of beneficial interest outstanding) ............................ $ 9.51
=========
</TABLE>
See the accompanying notes which are an integral part of the financial
statements.
Annual Report 13
<PAGE>
SSgA
Intermediate Fund
Statement of Operations
Amounts in thousands For the Fiscal Year Ended August 31, 1999
<TABLE>
<S> <C> <C>
Investment Income
Interest ................................................................. $ 4,155
Dividends ................................................................ 185
--------
Total Investment Income ............................................... 4,340
Expenses
Advisory fees ................................................... $ 617
Administrative fees ............................................. 24
Custodian fees .................................................. 54
Distribution fees ............................................... 29
Transfer agent fees ............................................. 30
Professional fees ............................................... 14
Registration fees ............................................... 30
Shareholder servicing fees ...................................... 50
Trustees' fees .................................................. 2
Miscellaneous ................................................... 6
------
Expenses before reductions ...................................... 856
Expense reductions .............................................. (392)
------
Expenses, net ......................................................... 464
--------
Net investment income ....................................................... 3,876
--------
Net Realized and Unrealized Gain (Loss)
Net realized gain (loss) on investments ..................................... (9)
Net change in unrealized appreciation (depreciation) on investments ......... (2,882)
--------
Net realized and unrealized gain (loss) ..................................... (2,891)
--------
Net increase (decrease) in net assets resulting from operations ............. $ 985
========
</TABLE>
See the accompanying notes which are an integral part of the financial
statements.
14 Annual Report
<PAGE>
SSgA
Intermediate Fund
Statement of Changes in Net Assets
Amounts in thousands For the Fiscal Years Ended August 31,
<TABLE>
<CAPTION>
1999 1998
-------- --------
<S> <C> <C>
Increase (Decrease) in Net Assets
Operations
Net investment income .................................................. $ 3,876 $ 3,628
Net realized gain (loss) ............................................... (9) 835
Net change in unrealized appreciation (depreciation) ................... (2,882) 941
-------- --------
Net increase (decrease) in net assets resulting from operations ..... 985 5,404
-------- --------
Distributions
From net investment income ............................................. (3,873) (3,382)
From net realized gain on investments .................................. (647) (10)
In excess of net realized gain on investments .......................... (516) --
-------- --------
Net decrease from distributions ..................................... (5,036) (3,392)
-------- --------
Share Transactions
Net increase (decrease) in net assets from share transactions .......... (1,090) 20,845
-------- --------
Total Net Increase (Decrease) in Net Assets ............................... (5,141) 22,857
Net Assets
Beginning of period .................................................... 76,691 53,834
-------- --------
End of period (including undistributed net investment income of
$992 and $992, respectively) ........................................ $ 71,550 $ 76,691
======== ========
</TABLE>
See the accompanying notes which are an integral part of the financial
statements.
Annual Report 15
<PAGE>
SSgA
Intermediate Fund
Financial Highlights
The following table includes selected data for a share outstanding throughout
each period and other performance information derived from the financial
statements.
<TABLE>
<CAPTION>
Fiscal Years Ended August 31,
----------------------------------------------
1999 1998 1997 1996 1995
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period ............. $10.04 $ 9.76 $ 9.57 $ 9.72 $ 9.37
------ ------ ------ ------ ------
Income From Investment Operations
Net investment income (a) ..................... .49 .53 .54 .53 .56
Net realized and unrealized gain (loss) ....... (.35) .28 .20 (.14) .34
------ ------ ------ ------ ------
Total Income From Operations ............... .14 .81 .74 .39 .90
------ ------ ------ ------ ------
Distributions
From net investment income .................... (.51) (.53) (.55) (.54) (.55)
From net realized gain on investments ......... (.16) -- -- -- --
------ ------ ------ ------ ------
Total Distributions ........................ (.67) (.53) (.55) (.54) (.55)
------ ------ ------ ------ ------
Net Asset Value, End of Period ................... $ 9.51 $10.04 $ 9.76 $ 9.57 $ 9.72
====== ====== ====== ====== ======
Total Return (%) ................................. 1.36 8.64 8.00 4.12 10.05
Ratios/Supplemental Data:
Net Assets, end of period ($ in thousands) .... 71,550 76,691 53,834 41,518 33,893
Ratios to average net assets (%):
Operating expenses, net (b) ................ .60 .60 .60 .60 .60
Operating expenses, gross (b) .............. 1.11 1.13 1.30 1.38 1.67
Net investment income ...................... 5.02 5.51 5.78 5.57 6.29
Portfolio turnover rate (%) ................... 304.47 244.58 242.76 221.73 26.31
</TABLE>
(a) For the period subsequent to August 31, 1998, average month-end shares
outstanding were used for this calculation.
(b) See Note 4 for current period amounts.
16 Annual Report
<PAGE>
SSgA
Intermediate Fund
Notes to Financial Statements
August 31, 1999
1. Organization
The SSgA Funds (the "Investment Company") is a series mutual fund,
currently comprised of 23 investment portfolios which are in operation as
of August 31, 1999. These financial statements report on one portfolio,
the SSgA Intermediate Fund (the "Fund"). The Investment Company is a
registered and diversified open-end investment company, as defined in the
Investment Company Act of 1940, as amended (the "1940 Act"), that was
organized as a Massachusetts business trust on October 3, 1987 and
operates under a First Amended and Restated Master Trust Agreement, dated
October 13, 1993, as amended (the "Agreement"). The Investment Company's
Agreement permits the Board of Trustees to issue an unlimited number of
full and fractional shares of beneficial interest at a $.001 par value.
2. Significant Accounting Policies
The Fund's financial statements are prepared in accordance with generally
accepted accounting principles which require the use of management
estimates. The following is a summary of the significant accounting
policies consistently followed by the Fund in the preparation of its
financial statements.
Security valuation: United States fixed-income securities listed and
traded principally on any national securities exchange are valued on the
basis of the last sale price or, lacking any sale, at the closing bid
price, on the primary exchange on which the security is traded. United
States over-the-counter, fixed-income securities and options are valued on
the basis of the closing bid price.
Many fixed-income securities do not trade each day, and thus last sale or
bid prices are frequently not available. Fixed-income securities may be
valued using prices provided by a pricing service when such prices are
believed to reflect the market value of such securities.
Money market instruments maturing within 60 days of the valuation date are
valued at amortized cost, a method by which each portfolio instrument is
initially valued at cost, and thereafter a constant accretion/amortization
to maturity of any discount or premium is assumed, unless the Board of
Trustees determines that amortized cost does not represent fair value.
The Fund may value securities for which market quotations are not readily
available at "fair value," as determined in good faith pursuant to
procedures established by the Board of Trustees.
Securities transactions: Securities transactions are recorded on a trade
date basis. Realized gains and losses from securities transactions are
recorded on the basis of identified cost.
Investment income: Dividend income is recorded on the ex-dividend date and
interest income is recorded daily on the accrual basis.
Amortization and accretion: All zero-coupon bond discounts and original
issue discounts are accreted for both tax and financial reporting
purposes. All short- and long-term market premiums/discounts are
amortized/accreted for both tax and financial reporting purposes.
Annual Report 17
<PAGE>
SSgA
Intermediate Fund
Notes to Financial Statements, continued
August 31, 1999
Federal income taxes: Since the Investment Company is a Massachusetts
business trust, each fund is a separate corporate taxpayer and determines
its net investment income and capital gains (or losses) and the amounts to
be distributed to each fund's shareholders without regard to the income
and capital gains (or losses) of the other funds.
It is the Fund's intention to qualify as a regulated investment company,
as defined by the Internal Revenue Code of 1986, as amended. This requires
the Fund to distribute all of its taxable income. Therefore, the Fund paid
no federal income taxes and no federal income tax provision was required.
As permitted by tax regulations, the Fund intends to defer a net realized
capital loss of $562,512 incurred from November 1, 1998 to August 31,
1999, and treat it as arising in the fiscal year 2000.
The Fund's aggregate cost of investments and the composition of unrealized
appreciation and depreciation of investment securities for federal income
tax purposes as of August 31, 1999 are as follows:
Net Unrealized
Federal Tax Unrealized Unrealized Appreciation
Cost Appreciation (Depreciation) (Depreciation)
------------- ------------ -------------- --------------
$ 78,289,190 $ 59,320 $ (1,881,956) $ (1,822,636)
Dividends and distributions to shareholders: Income dividends and capital
gain distributions, if any, are recorded on the ex-dividend date.
Dividends are generally declared and paid quarterly. Capital gain
distributions are generally declared and paid annually. An additional
distribution may be paid by the Fund to avoid imposition of federal income
tax on any remaining undistributed net investment income and capital
gains.
The timing and characterization of certain income and capital gain
distributions are determined in accordance with federal tax regulations
which may differ from generally accepted accounting principles ("GAAP").
As a result, net investment income and net realized gain (or loss) on
investment transactions for a reporting period may differ significantly
from distributions during such period. The differences between tax
regulations and GAAP relate primarily to investments in certain
mortgage-backed securities and certain securities sold at a loss.
Accordingly, the Fund may periodically make reclassifications among
certain of its capital accounts without impacting its net asset value.
Expenses: Most expenses can be directly attributed to the Fund. Expenses
which cannot be directly attributed are allocated among all funds based
principally on their relative net assets.
Forward commitments: The Fund may contract to purchase securities for a
fixed price at a future date beyond customary settlement time (not to
exceed 120 days)(i.e., a "forward commitment" or "delayed settlement"
transaction, e.g., to be announced ("TBA")) consistent with a Fund's
ability to manage its investment portfolio and meet redemption requests.
The price of the underlying securities and the date upon which the
securities will be delivered and paid for are fixed at the time the
transaction is negotiated. The Fund may dispose of a forward commitment
transaction prior to settlement, if it is appropriate to do so, and
realize short-term gains (or losses) upon such sale. When effecting such
transactions, cash or liquid high-grade debt obligations of the Fund will
be segregated on the Fund's records in a dollar amount sufficient to make
payment for the portfolio securities to be purchased at the trade date and
maintained until the transaction is settled. A forward commitment
transaction
18 Annual Report
<PAGE>
SSgA
Intermediate Fund
Notes to Financial Statements, continued
August 31, 1999
involves a risk of loss if the value of the security to be purchased
declines prior to the settlement date or the other party to the
transaction fails to complete the transaction.
3. Securities Transactions
Investment transactions: For the year ended August 31, 1999, purchases and
sales of investment securities, excluding US Government and Agency
obligations and short-term investments, aggregated to $62,738,245, and
$57,280,879, respectively.
For the year ended August 31, 1999, purchases and sales of US Government
and Agency obligations, excluding short-term investments, aggregated to
$162,191,199, and $173,630,583, respectively.
Securities Lending: Effective December 17, 1998, the Investment Company
started its securities lending program. The program allows each Fund to
loan securities with a value up to 33 1/3% of its total assets to certain
brokers. The Fund receives cash (U.S. currency), U.S. Government or U.S.
Government agency obligations as collateral against the loaned securities.
To the extent that a loan is secured by cash collateral, such collateral
shall be invested by State Street Bank and Trust Company in short-term
instruments, money market mutual funds, and such other short-term
investments, provided the investments meet certain quality and
diversification requirements. Under the securities lending arrangement,
the collateral received is recorded on the Fund's statement of assets and
liabilities along with the related obligation to return the collateral. In
those situations where the Company has relinquished control of securities
transferred, it derecognizes the securities and records a receivable from
the counterparty.
Income generated from the investment of cash collateral, less negotiated
rebate fees paid to participating brokers and transaction costs, is
divided between the Fund and State Street Bank and Trust Company and is
recorded as interest income for the Fund. To the extent that a loan is
secured by non-cash collateral, brokers pay the Fund negotiated lenders'
fees, which are divided between the Fund and State Street Bank and Trust
Company and are recorded as interest income for the Fund. All collateral
received will be in an amount at least equal to 102% (for loans of U.S.
securities) or 105% (for non-U.S. securities) of the market value of the
loaned securities at the inception of each loan. Should the borrower of
the securities fail financially, there is a risk of delay in recovery of
the securities or loss of rights in the collateral. Consequently, loans
are made only to borrowers which are deemed to be of good financial
standing. As of August 31, 1999, there were no outstanding securities on
loan.
4. Related Parties
Adviser: The Investment Company has an investment advisory agreement with
State Street Bank and Trust Company under which the Adviser directs the
investments of the Fund in accordance with its investment objectives,
policies, and limitations. For these services, the Fund pays a fee to the
Adviser, calculated daily and paid monthly, at the annual rate of .80% of
its average daily net assets. The Adviser voluntarily agrees to reimburse
the Fund for all expenses in excess of .60% of average daily net assets on
an annual basis. As of August 31, 1999, the receivable due from the
Adviser for expenses in excess of the expense cap has been netted against
the Advisory fee payable. The Investment Company also has contracts with
the Adviser to provide custody, shareholder servicing and transfer agent
services to the Fund. These amounts are presented in the accompanying
Statement of Operations.
Annual Report 19
<PAGE>
SSgA
Intermediate Fund
Notes to Financial Statements, continued
August 31, 1999
In addition, the Fund has entered into arrangements with its Adviser
whereby credits realized as a result of uninvested cash balances were used
to reduce a portion of the Fund's expenses. During the year, the Fund's
custodian fees were reduced by $4,077 under these arrangements.
Administrator: The Investment Company has an administration agreement with
Frank Russell Investment Management Company (the "Administrator"), a
wholly owned subsidiary of The Northwestern Mutual Life Insurance Company,
under which the Administrator supervises all non-portfolio investment
aspects of the Investment Company's operations and provides adequate
office space and all necessary office equipment and services, including
telephone service, utilities, stationery supplies, and similar items. The
Investment Company pays the Administrator the following fees for services
supplied by the Administrator pursuant to the Administration Agreement:
(i) an annual fee, payable monthly on a pro rata basis, based on the
following percentages of the average daily net assets of all domestic
funds: $0 up to and including $500 million - .06%; over $500 million to
and including $1 billion - .05%; over $1 billion - .03%, and (ii) less an
amount equal to the sum of certain distribution-related expenses incurred
by the Investment Company's Distributor on behalf of the Fund (up to a
maximum of 10% for the period September 1, 1997 to December 31, 1997, up
to a maximum of 5% for the period January 1, 1998 to December 31, 1998 and
0% thereafter, of the asset-based fee determined in (i)). In addition, the
Fund reimburses the Administrator for out-of-pocket expenses and start-up
costs for new funds.
Distributor and Shareholder Servicing: The Investment Company has a
Distribution Agreement with Russell Fund Distributors (the "Distributor")
which is a wholly-owned subsidiary of the Administrator to promote and
offer shares of the Investment Company. The Distributor may enter into
sub-distribution agreements with other non-related parties. The amounts
paid to the Distributor are included in the accompanying Statement of
Operations.
The Investment Company has a Distribution Plan pursuant to Rule 12b-1 (the
"Plan") under the 1940 Act. Under this Plan, the Investment Company is
authorized to make payments to the Distributor, or any Shareholder
Servicing Agent, as defined in the Plan, for providing distribution and
marketing services, for furnishing assistance to investors on an ongoing
basis, and for the reimbursement of direct out-of-pocket expenses charged
by the Distributor in connection with the distribution and marketing of
shares of the Investment Company and the servicing of investor accounts.
The Fund has service agreements with the Adviser, State Street Brokerage
Services, Inc. ("SSBSI"), a wholly-owned subsidiary of the Adviser, the
Adviser's Retirement Investment Services Division ("RIS"), the Adviser's
Metropolitan Division of Commercial Banking ("Commercial Banking") and
State Street Solutions ("Solutions")(collectively the "Agents"), as well
as several unaffiliated service providers. For these services, the Fund
pays .025%, .175%, .175%, .175%, and .175% to the Adviser, SSBSI, RIS,
Commercial Banking, and Solutions, respectively, based upon the average
daily value of all Fund shares held by or for customers of these Agents.
For the year ended August 31, 1999, the Fund was charged shareholder
servicing expenses of $16,372, $2,186, $2,786, $4,174, and $24,182, by the
Adviser, SSBSI, RIS, Commercial Banking, and Solutions, respectively.
The combined distribution and shareholder servicing payments shall not
exceed .25% of the average daily value of net assets on an annual basis.
The shareholder servicing payments shall not exceed .20% of the average
daily value
20 Annual Report
<PAGE>
SSgA
Intermediate Fund
Notes to Financial Statements, continued
August 31, 1999
of net assets on an annual basis. Any payments that exceed the maximum
amount of allowable reimbursement may be carried forward for two years
following the year in which the expenditure was incurred so long as the
plan is in effect. The Fund's responsibility for any such expenses carried
forward shall terminate at the end of two years following the year in
which the expenditure was incurred. The Trustees or a majority of the
Fund's shareholders have the right, however, to terminate the Distribution
Plan and all payments thereunder at any time. The Fund will not be
obligated to reimburse the Distributor for carryover expenses subsequent
to the Distribution Plan's termination or noncontinuance. There were no
carryover expenses as of August 31, 1999.
Board of Trustees: Through May 31, 1999, the Investment Company paid each
Trustee not affiliated with the Investment Company a retainer of $48,000
annually, $1,500 for each board meeting attended, an additional $1,500 for
attending the annual audit committee meeting, and reimbursement for
out-of-pocket expenses. As of June 1, 1999, each Trustee receives $2,500
for each board meeting attended, an additional $2,500 for attending the
annual audit committee meeting and $2,500 for the valuation committee fee
in addition to the $48,000 annual retainer. These expenses are allocated
among all of the Funds based upon their relative net assets.
Accrued fees payable to affiliates and trustees as of August 31, 1999 were
as follows:
Advisory fees $ 39,068
Administration fees 2,041
Custodian fees 8,562
Distribution fees 544
Shareholder servicing fees 5,006
Transfer agent fees 6,831
Trustees' fees 99
--------
$ 62,151
========
Beneficial Interest: As of August 31, 1999, one shareholder, who was also
an affiliate of the Investment Company, was a record owner of
approximately 19% of the total outstanding shares of the Fund.
5. Fund Share Transactions
Fiscal Years Ended August 31,
--------------------------------------------
1999 1998
-------------------- --------------------
Shares Dollars Shares Dollars
-------- -------- -------- --------
Proceeds from shares sold ...... 4,663 $ 45,790 3,663 $ 35,837
Proceeds from reinvestment of
distributions ................ 444 4,359 305 2,980
Payments for shares redeemed ... (5,220) (51,239) (1,842) (17,972)
-------- -------- -------- --------
Total net increase (decrease) .. 113 $ 1,090 2,126 $ 20,845
======== ======== ======== ========
Annual Report 21
<PAGE>
SSgA
Intermediate Fund
Notes to Financial Statements, continued
August 31, 1999
6. Line of Credit
The Fund and several affiliated Funds (the "Participants") share in a $50
million revolving credit facility for temporary or emergency purposes,
including the meeting of redemption requests that otherwise might require
the untimely disposition of securities. The Participants are charged an
annual commitment fee of .09% (.065% prior to July 15, 1999) on the
average daily unused amount of the aggregate commitment, which is
allocated among each of the Participants. Interest, at the Federal Fund
Rate plus .50% annually, is calculated based on the market rates at the
time of the borrowing. The Fund may borrow up to a maximum of 33 1/3
percent of the value of it's net assets under the agreement. The Fund did
not have any drawdowns during the year.
7. Dividends
On September 1, 1999, the Board of Trustees declared a dividend of $0.1313
from net investment income, payable on September 7, 1999 to shareholders
of record on September 2, 1999.
22 Annual Report
<PAGE>
SSgA
Intermediate Fund
Tax Information
August 31, 1999 (Unaudited)
The Fund paid distributions of $439,196 from net long-term capital gains during
its taxable year ended August 31, 1999.
Please consult a tax advisor for questions about federal or state income tax
laws.
Annual Report 23
<PAGE>
SSgA Intermediate Fund
One International Place, 27th Floor
Boston, Massachusetts 02110
(800) 997-7327
- --------------------------------------------------------------------------------
Trustees
Lynn L. Anderson, Chairman
William L. Marshall
Steven J. Mastrovich
Patrick J. Riley
Richard D. Shirk
Bruce D. Taber
Henry W. Todd
Officers
Lynn L. Anderson, President, Treasurer and CEO
Mark E. Swanson, Assistant Secretary, Assistant
Treasurer and Principal Accounting Officer
J. David Griswold, Vice President and Secretary
Deedra S. Walkey, Assistant Secretary
Rick J. Chase, Assistant Secretary
Carla L. Anderson, Assistant Secretary
Investment Adviser
State Street Bank and Trust Company
225 Franklin Street
Boston, Massachusetts 02110
Custodian, Transfer Agent and
Office of Shareholder Inquiries
State Street Bank and Trust Company
1776 Heritage Drive
North Quincy, Massachusetts 02171
(800) 647-7327
Distributor
Russell Fund Distributors, Inc.
One International Place, 27th Floor
Boston, Massachusetts 02110
(800) 997-7327
Administrator
Frank Russell Investment Management Company
909 A Street
Tacoma, Washington 98402
Legal Counsel
Goodwin, Procter & Hoar LLP
Exchange Place
Boston, Massachusetts 02109
Independent Accountants
PricewaterhouseCoopers LLP
160 Federal Street
Boston, Massachusetts 02110
24 Annual Report
<PAGE>
SSgA(R) Funds
Emerging Markets Fund
Annual Report
August 31, 1999
Table of Contents
Page
Chairman's Letter............................................. 4
Portfolio Management Discussion and Analysis.................. 6
Report of Independent Accountants............................. 8
Financial Statements.......................................... 9
Financial Highlights.......................................... 25
Notes to Financial Statements................................. 26
Tax Information............................................... 33
Fund Management and Service Providers......................... 34
"SSgA(R)" is a registered trademark of State Street Corporation and is licensed
for use by the SSgA Funds.
This report is prepared from the books and records of the Fund and it is
submitted for the general information of shareholders. This information is for
distribution to prospective investors only when preceded or accompanied by a
SSgA Funds Prospectus containing more complete information concerning the
investment objective and operations of the Fund, charges and expenses. The
Prospectus should be read carefully before an investment is made.
Performance is historical and assumes reinvestment of all dividends and capital
gains. Investment return and principal value will fluctuate so that an
investor's shares, when redeemed, may be worth more or less than when purchased.
Past performance is not indicative of future results. International markets
entail different risks than those typically associated with domestic markets,
including currency fluctuations, political and economic instability, accounting
changes and foreign taxation. Securities may be less liquid and more volatile.
Investments in emerging or developing markets involve exposure to economic
structures that are generally less diverse and mature, and to political systems
which can be expected to have less stability than those of more developed
countries. Please see the Prospectus for further details. Russell Fund
Distributors, Inc., is the distributor of the SSgA Funds .
<PAGE>
SSgA Emerging Markets Fund
- --------------------------------------------------------------------------------
Letter From the Chairman of State Street Global Advisors
- --------------------------------------------------------------------------------
Dear Shareholders,
It is my pleasure to provide you with the SSgA Funds annual report for the
fiscal year ended August 31, 1999. The SSgA Fund family has grown to include
twenty-three portfolios covering a broad range of investment strategies. The
enclosed information provides an overview of the investment process for the SSgA
Emerging Markets Fund. This overview contains market updates, performance, and
financial information for the Fund. I hope you will find this information a
useful reference as you review your investment strategy.
During the past fiscal year, the SSgA Fund family has opened two new Funds. The
names and investment objectives for these funds are as follows:
The SSgA Aggressive Equity Fund seeks to maximize total return through investing
in US equity securities that are undervalued relative to their growth potential
as measured by SSgA's proprietary models.
The SSgA IAM Shares Fund seeks to maximize total return by investing primarily
in equity securities of companies that have entered into collective bargaining
agreements with the International Association of Machinists and Aerospace
Workers or affiliated labor unions.
Additionally, three SSgA Funds achieved a five-year track record during the 1999
fiscal year. These funds include the two institutional money market funds, SSgA
US Treasury and SSgA Prime Money Market Funds and the SSgA Emerging Markets
Fund. We are proud of our long-term record and look forward to having additional
funds complete their five-year anniversary.
In today's complex global marketplace, we are continually researching new
products and ideas to introduce to our fund family. Here at SSgA, we are
committed to providing a wide range of competitive investment vehicles to
fulfill your investment needs.
I would like to thank you for choosing the SSgA Funds.
Sincerely,
/s/ Nicholas A. Lopardo
Nicholas A. Lopardo
State Street Global Advisors
Chairman and Chief Executive Officer
4 Annual Report
<PAGE>
SSgA Emerging Markets Fund
- --------------------------------------------------------------------------------
Management of the Funds
- --------------------------------------------------------------------------------
[PHOTO]
Nicholas A. Lopardo
Chairman and Chief Executive Officer
A Team Approach to Investment Management
Our investment strategies are the product of the combined experience of our
professional staff. Portfolio Managers work together to develop and enhance the
techniques that drive our investment processes. As a result, the portfolios we
manage benefit from the knowledge of the entire team.
Mr. Josh Feuerman, Principal, has been the portfolio manager primarily
responsible for investment decisions regarding the SSgA Emerging Markets Fund
since November 1997. Mr. Feuerman joined State Street in 1987, and is a
portfolio manager in SSgA's Global Active Equities Group responsible for
emerging markets portfolios. He also assists in marketing SSgA's equity products
to existing and prospective clients, as well as to the consultant community.
There are seven other portfolio managers working with Mr. Feuerman.
Annual Report 5
<PAGE>
SSgA Emerging Markets Fund
- --------------------------------------------------------------------------------
Portfolio Management Discussion and Analysis
- --------------------------------------------------------------------------------
Objective: Maximize total return primarily through capital appreciation.
Invests in: Equity securities of foreign issuers domiciled, or doing a
substantial portion of their business, in countries having a developing economy
or securities market.
Strategy: The Fund invests in emerging market countries with prospects for
sustained macro and micro economic growth. Through the use of proprietary
evaluation models, the Fund invests primarily in the International Finance
Corporation Investable ("IFCI") Index countries. As the IFCI Index introduces
new emerging market countries, the Fund will expand to gain exposure to new
emerging countries.
- --------------------------------------------------------------------------------
GROWTH OF $10,000 INVESTMENT
Dates Emerging Markets Fund I F C Investable Composite Index**
Inception* $10,000 $10,000
1994 $11,450 $10,529
1995 $10,387 $8,357
1996 $11,201 $8,881
1997 $12,895 $9,190
1998 $7,045 $4,830
1999 $11,713 $8,173
================================================================================
Performance Review
For the fiscal year ended August 31, 1999 the SSGA Emerging Markets Fund posted
a gain of 66.41%, as compared to the International Finance Corporation
Investable (IFCI) Index, which returned 69.24% over the same period. The Fund's
performance is net of operating expenses, whereas Index results do not include
expenses of any kind.
Market and Portfolio Highlights
Emerging markets have rebounded dramatically from the depths of the fall 1998
crises, when many concerns weighed on investors' minds. These worries included
Brazil's overvalued currency, Malaysian capital controls, Russia's financial
crisis, and the tightening of global credit markets and threat of worldwide
recession. Markets sold off to panic levels as investors seemed to abandon
emerging markets as an asset class.
- --------------------------------------------------------------------------------
SSgA Emerging Markets Fund
- --------------------------------------------------------------------------------
Period Ended Growth of Total
08/31/99 $10,000 Return
- --------------- ------------ -------
1 Year $ 16,641 66.41%
5 Year $ 10,237 0.47%
Inception $ 11,724 2.93%+
- --------------------------------------------------------------------------------
International Finance Corporation
Investable Composite Index
- --------------------------------------------------------------------------------
Period Ended Growth of Total
08/31/99 $10,000 Return
- --------------- ------------ -------
1 Year $ 16,924 69.24%
5 Year $ 7,762 (4.94)%
Inception $ 8,173 (3.60)%+
See related Notes on following page.
6 Annual Report
<PAGE>
SSgA Emerging Markets Fund
- --------------------------------------------------------------------------------
Portfolio Management Discussion and Analysis
- --------------------------------------------------------------------------------
To combat what Treasury Secretary Rubin described in a speech as "... the most
severe financial crisis of the last 50 years", central banks around the world
aggressively cut interest rates. Federal Reserve Chairman Alan Greenspan cut the
Federal Funds rate three times during the second half of 1998. Over the course
of the last 12 months there have been more than 150 central bank rate cuts
globally. This surge in global liquidity, combined with strong US economic
growth and IMF-led economic restructuring in emerging markets, led to
spectacular global equity returns.
Asia was by far the world's top region over the last 12 months, rising 141%
during this period. Korea, benefiting from lower interest rates, corporate
restructuring, and government reforms, was the star performer soaring 310%. This
made a positive contribution to fiscal year results, as the Fund maintains a
16.2% weighting in Korean issues. Despite its much maligned currency controls,
Malaysia was another strong market this year, rising 199%. The Fund held an
equity swap position in this market through the middle of April, which
appreciated 106%. Taiwan, the second largest position in the portfolio at 14.2%,
rose 60% this year.
The second largest region in the Fund, the EMEA (Europe, Middle East and Africa)
rose 52% this year. Greece was sizzling as the market rose 134% in the euphoria
surrounding EMU convergence and, much like Portugal a year earlier, low interest
rates and an enthusiastic retail market were primary drivers of these impressive
results. Greece is one of the larger weightings in the Fund, and strong stock
selection within the market has further added to returns. For example, small cap
holdings such as Aegek and Naoussa Spinning Mills rose 303% and 203%,
respectively. Stronger oil prices boosted sentiment towards Russian investments,
as that market rose 102% over the past twelve months. A peaceful election and
higher commodity prices led the South African market to a gain of 62% for the
same period. This provided further benefit to the Fund, as South Africa
comprises the portfolio's largest exposure in the region, 12% at August 31,
1999. Larger holdings in this market include Anglo American and DeBeers, with
gains of 106% and 116%, respectively.
Latin America, despite a Brazilian devaluation during the year, managed to
return 37% for the period. While the Brazilian Real collapsed 39%, the local
market rallied 70% and managed to squeeze out a 4% gain in US dollar terms.
Mexico, the Fund's largest holding in the region at 11.2%, benefited from higher
oil prices and a strong US economy. The market rose 67% overall, and was led by
strong returns from Carso Global Telecom (up 170%) and Telefonos de Mexico (up
96%). Argentina rose 53% this year after the Spanish oil company Repsol bought
YPF, Argentina's largest company. YPF, comprising 1% of the Fund at fiscal
year-end, was among the larger holdings at the time it was taken over.
- --------------------------------------------------------------------------------
Top Ten Equity Holdings
(as a percent of Total Investments) August 31, 1999
- --------------------------------------------------------------------------------
Samsung Electronics, Ltd. 3.0%
Telefonos de Mexico SA Series L - ADR 1.6
National Bank of Greece (Regd) 1.5
Telefonos de Mexico SA Series L NPV 1.3
Anglo American PLC 1.2
Commercial Bank of Greece (Regd) 1.1
Taiwan Semiconductor Manufacturing Co. 1.1
Korea Electric Power Corp. 1.1
De Beers Centenary AG 1.0
LG Electronics 1.0
- --------------------------------------------------------------------------------
-----------------------------
Notes: The following notes relate to the Growth of $10,000 graph and table on
the preceding page.
* The Fund commenced operations on March 1, 1994. Index comparison also
began on March 1, 1994.
** The IFC Investable Composite Index is a market capitalization-weighted
index of the performance of equity securities listed on the stock
exchanges of emerging market countries.
+ Annualized.
Performance is historical and assumes reinvestment of all dividends and capital
gains. Investment return and principal value will fluctuate so that an
investor's shares, when redeemed, may be worth more or less than when purchased.
Past performance is not indicative of future results.
Investments in securities of non-US issuers and foreign currencies involve
investment risks different from those of US issuers. The Prospectus contains
further information and details regarding these risks.
Annual Report 7
<PAGE>
Report of Independent Accountants
To the Shareholders and Board of Trustees
of the SSgA Funds:
In our opinion, the accompanying statement of assets and liabilities and
statement of net assets, and the related statements of operations and of changes
in net assets and the financial highlights present fairly, in all material
respects, the financial position of SSgA Emerging Markets Fund (the "Fund") at
August 31, 1999, the results of its operations for the fiscal year then ended
and the changes in its net assets for each of the two fiscal years in the period
then ended, and the financial highlights for each of the five fiscal years in
the period then ended, in conformity with generally accepted accounting
principles. These financial statements and financial highlights (hereafter
referred to as "financial statements") are the responsibility of the Fund's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these financial
statements in accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of securities at August 31, 1999 by correspondence with the
custodian and brokers, provide a reasonable basis for the opinion expressed
above.
Boston, Massachusetts
October 11, 1999
/s/ PricewaterhouseCoopers LLP
8 Annual Report
<PAGE>
SSgA
Emerging Markets Fund
Statement of Net Assets
August 31, 1999
Market
Number Value
of (000)
Shares $
------ ------
Common Stocks - 85.0%
Argentina - 0.8%
Acindar Industria Argentina de Aceros SA Class B 116,794 148
Banco de Galicia Class B 124,537 600
Dalmine Siderca SA Class A 253,276 400
Ledesma Class B 359,967 212
Naviera Perez Companc Class B 134,270 782
Telecom Argentina Class B 52,895 298
Telefonica de Argentina Class B 130,100 385
--------
2,825
--------
Brazil - 3.1%
Centrais Eletricas Brasileiras SA NPV 117,675,000 1,831
Centrais Geradoras do Sul do Brasil SA NPV (a) 66,847,000 40
Companhia Cervejaria Brahma NPV 2,263,200 918
Companhia de Saneamento Basico do Estado de Sao
Paulo NPV 4,850,000 320
Companhia Siderurgica de Tubarao NPV (a) 13,300,000 90
Embratel Participacoes SA (a) 136,572,192 745
Santista Alimentos SA NPV (a) 56,288 13
Sider Nacional cia NPV 29,212,200 707
Souza Cruz NPV 133,000 747
Tele Celular Sul Participacoes SA NPV 136,572,192 134
Tele Centro Oeste Celular Participacoes SA NPV 136,572,192 127
Tele Centro Sul Participacoes SA NPV (a) 136,572,192 650
Tele Norte Leste Participacoes SA NPV 136,572,192 1,194
Tele Sudeste Celular Participacoes SA NPV 136,572,192 331
Telecomunicacoes de Sao Paulo SA NPV 3,500,000 264
Telesp Celular Participacoes SA NPV 136,572,192 612
Telesp Participacoes SA NPV 159,436,192 1,700
--------
10,423
--------
Chile - 2.7%
Banco de A. Edwards Series A - ADR 12,200 185
Banco Santander Chile Series A - ADR 37,600 630
Banco Santiago - ADR 18,000 378
Chile Fund, Inc. 130,700 1,430
Chilquinta SA - ADR 4,550 33
Compania de Telecomunicaciones de Chile SA - ADR 79,300 1,784
Cristalerias de Chile - ADR 7,500 103
Distribucion Y Servicio D&S SA - ADR 30,800 508
Embotelladora Andina SA Series A- ADR 35,000 591
Enersis SA - ADR 56,916 1,277
Five Arrows Chile Investment Trust (a) 330,000 722
Gener SA - ADR 31,300 573
Laboratorio Chile SA - ADR 9,850 182
Madeco SA - ADR 22,700 241
Maderas y Sinteticos SA - ADR 9,000 88
Santa Isabel SA - ADR (a) 2,725 24
Sociedad Quimica Y Minera de Chile SA - ADR 4,800 144
Vina Concha Y Toro SA - ADR 4,800 187
--------
9,080
--------
Annual Report 9
<PAGE>
SSgA
Emerging Markets Fund
Statement of Net Assets, continued
August 31, 1999
Market
Number Value
of (000)
Shares $
------ ------
China - 0.1%
New World China Land, Ltd. (a) 433,000 348
Shandong Huaneng Power Co., Ltd. Series N - ADR 16,500 72
--------
420
--------
Colombia - 1.3%
Banco de Bogota NPV 222,127 552
Banco Ganadero SA Class B - ADR 28,900 508
Banco Industrial Colombiano 330,072 213
Bavaria 341,511 1,034
Cementos Argos 279,977 616
Cia Nacional de Chocolates 199,007 546
Coltabaco SA 185,754 212
Promigas SA 41,910 126
Suramericana de Inversiones SA 108,100 117
Valores Bavaria SA 446,699 288
--------
4,212
--------
Egypt - 1.5%
Al Ezz Steel Rebars SA - GDR (a) 27,870 297
Al Watany Bank of Egypt 19,500 126
Ameriyah Cement Co. 16,400 223
Commercial International Bank 31,070 268
Eastern Tobacco 9,800 226
EFG Hermes Securities Brokerage SAE - GDR (a) 7,300 74
Egypt American Bank 12,600 163
Egypt International Pharmaceutical Industries Co. 4,700 227
Helwan For Cement 12,200 140
Madinet NASR for Housing & Development 12,540 130
MISR Elgadida for Housing and Reconstruction 5,100 142
MISR international Bank SAE - GDR 50,400 423
MISR International Bank SAE - GDR (144A) 125,500 1,057
National Societe Generale Bank 23,550 255
Orascom Construction (a) 30,000 380
Paints & Chemicals Industries Co. SAE 9,900 179
Suez Cement Co. (Regd) - GDR 22,700 312
Suez Cement Co. - GDR (144A) 22,700 317
--------
4,939
--------
Greece - 9.7%
Aegek SA 122,840 2,100
Alpha Leasing SA (Regd) 24,932 1,310
Aluminum Co. of Greece Industrial and Commercial
(Regd) 10,260 602
Commercial Bank of Greece (Regd) 37,980 3,688
Commercial Bank of Greece SA Rights (a) 37,980 870
Credit Bank (Regd) 32,400 2,437
ETBA Leasing SA (Regd)(a) 58,432 1,743
Hellenic Bottling Co. SA 33,840 832
Hellenic Petroleum SA (a) 64,642 692
Hellenic Telecommunication Organization SA - GDR 66,931 1,389
Heracles General Cement Co. 19,300 606
Intracom SA 15,216 1,322
Ionian Bank SA (Regd.)(a) 3,060 166
Loulis Flour Mills SA (Regd) 26,777 682
Michaniki SA 112,840 2,950
Naoussa Spinning Mills 37,940 851
10 Annual Report
<PAGE>
SSgA
Emerging Markets Fund
Statement of Net Assets, continued
August 31, 1999
Market
Number Value
of (000)
Shares $
------ ------
Naoussa Spinning Mills SA Rights (a) 37,940 326
National Bank of Greece (Regd) 65,028 4,808
Nikas SA 98,560 2,461
Petzetakis SA (a) 27,450 854
Piraeus Bank SA 6,280 179
Shelman SA 26,130 740
Strintzis Shipping 59,560 738
Titan Cement Co. SA 3,160 345
--------
32,691
--------
Hungary - 1.2%
BorsodChem Rt. 4,600 134
Egis Gyogyszergyar 5,743 191
Gedeon Richter, Ltd. - GDR 6,300 314
Magyar Olaj Es Gas 19,102 493
Magyar Tavkozlesi Rt. (Regd) 367,010 2,245
Mol Magyar Olaj-Es Gazipari Rt. - GDS 10,300 260
OTP Bank Rt. 10,695 491
--------
4,128
--------
India - 1.6%
Andhra Valley Power Supply Co., Ltd. (a) 74,200 98
Arvind Mills, Ltd. (a) 34,300 25
Bharat Heavy Electricals, Ltd. (a) 34,200 249
Bharat Petroleum Corp., Ltd. 18,400 115
CESC, Ltd. (a) 123,300 132
Crompton Greaves, Ltd. (a) 51,500 107
Dr. Reddy's Laboratories, Ltd. 5,500 157
Gujarat State Fertilisers & Chemicals, Ltd. (a) 72,200 104
Hindustan Lever, Ltd. 25,600 1,569
Industrial Development Bank of India, Ltd. 124,100 109
ITC, Ltd. 27,400 648
Madras Refineries, Ltd. (a) 105,300 115
Mahanagar Telephone Nigam, Ltd. 25,100 117
Mahindra & Mahindra, Ltd. 12,500 118
Reliance Industries, Ltd. 96,200 430
State Bank of India 28,100 156
Tata Engineering and Locomotive Co., Ltd. 72,850 527
Tata Iron and Steel Co., Ltd. 64,700 251
Videsh Sanchar Nigam, Ltd. 16,900 421
--------
5,448
--------
Indonesia - 1.5%
PT Astra International, Inc. (a) 728,000 256
Indah Kiat Pulp & Paper (Alien Market)(a) 1,485,500 542
Pabrik Kertas Tjiwi Kimia (a) 893,500 256
PT Daya Guna Samudera Tbk (a) 475,750 192
PT Gudang Garam Tbk 582,000 1,404
PT Hanjaya Mandala Sampoerna (a) 287,500 598
PT Indofood Sukses Makmur Tbk (a) 511,000 546
PT Indosat 174,500 271
PT Lippo Bank (Alien Market)(a) 7,368,000 144
Semen Gresik 132,000 258
Telekomunikasi Indonesia Series B (a) 1,257,120 485
--------
4,952
--------
Israel - 4.1%
Africa - Israel Investments, Ltd. 1,251 819
Agis Industries Ltd. (a) 96,600 524
Bank Hapoalim - GDR (a) 12,210 142
Bank Hapoalim, Ltd. 561,598 1,295
Bank Leumi Le-Israel 641,721 1,109
Annual Report 11
<PAGE>
SSgA
Emerging Markets Fund
Statement of Net Assets, continued
August 31, 1999
Market
Number Value
of (000)
Shares $
------ ------
Bezeq Israeli Telecommunication
Corp., Ltd. (a) 189,650 686
Clal Industries, Ltd. 121,344 810
Clal Israel, Ltd. 23,070 679
Delek Israel Fuel Corp., Ltd. 20,422 731
ECI Telecom, Ltd. 29,100 826
Elco Holdings, Ltd. (a) 134,240 1,085
Electric Wire & Cable (a) 14,000 45
IDB Development Corp., Ltd. 5,780 159
IDB Holding Corp., Ltd. 5,459 147
Industrial Buildings Corp. 112,496 161
Koor Industries 13,135 1,152
Leumi Insurance Holdings 270,394 198
Makhteshim-Agan Industries, Ltd. (a) 155,723 275
Osem Investment, Ltd. 93,925 487
Supersol, Ltd. 220,551 579
Teva Pharmaceutical Industries, Ltd. - ADR 36,800 1,729
United Mizrahi Bank Group, Ltd. 66,616 154
--------
13,792
--------
Malaysia - 0.1%
Faber Group Berhad (a) 445,600 110
IGB Corp. Berhad 450,000 184
Lion Land Berhad 154,000 40
--------
334
--------
Mexico - 11.7%
Alfa SA de CV Class A NPV 211,662 800
Altos Hornos de Mexico SA - NPV (a) 499,000 134
Apasco SA de CV NPV 86,000 472
Carso Global Telecom Series A1 NPV (a) 472,000 2,609
Cemex SA de CV Class B NPV 331,737 1,470
Cemex SA de CV NPV 378,344 1,668
Cifra SA de CV Series V NPV (a) 1,763,661 2,915
Compania Cervecerias Unidas SA - ADR 15,000 393
Controladora Comercial Mexicana SA de CV NPV 842,000 789
Corporacion GEO SA de CV Series B NPV (a) 94,000 311
Cydsa SA Series A NPV 356,000 508
Desc SA de CV NPV 110,655 108
Desc Sociedad de Fomento Industrial SA de CV Series
B NPV 731,000 677
Empresa Nacional de Electric - ADR 93,442 1,156
Empresas ICA Sociedad Controladora SA de CV NPV 362,000 222
Empresas La Moderna SA de CV NPV (a) 158,000 905
Fomento Economico Mexicano SA de CV 92,000 301
Fomento Economico Mexicano SA de CV Series B - ADR 19,400 641
Grupo Carso Series A NPV (a) 392,000 1,517
Grupo Casa Autrey SA de CV NPV (a) 360,000 127
Grupo Cementos Chihuahua Series B NPV 633,000 421
Grupo Continental SA Series CP 599,000 823
Grupo Financiero Banamex Accival SA de (CV Banacci)
Series O (a) 182,000 349
Grupo Financiero Bancomer SA de CV NPV Series O (a) 634,000 154
Grupo Gigante SA Series B NPV (a) 2,359,000 849
Grupo Herdez SA Class B NPV (a) 1,408,000 426
12 Annual Report
<PAGE>
SSgA
Emerging Markets Fund
Statement of Net Assets, continued
August 31, 1999
Market
Number Value
of (000)
Shares $
------ ------
Grupo Industrial Bimbo SA de CV Series A NPV 398,761 837
Grupo Industrial Maseca Series B NPV 482,000 311
Grupo Industrial Saltillo SA de CV NPV 70,000 215
Grupo Mexico SA Series B NPV 294,108 1,270
Grupo Modelo SA de CV Series C NPV 288,000 768
Grupo Posadas SA Series A NPV (a) 680,000 436
Grupo Simec SA de CV Series B NPV (a) 620,000 65
Grupo Televisa SA NPV (a) 99,000 1,782
Industrias Penoles SA NPV 120,000 311
Kimberly-Clark, Mexico Class A NPV 365,000 1,154
Organizacion Soriana SA de CV Series B NPV 235,000 923
Sanluis Corporacion SA de CV - CPO (Units)(a) 202,000 389
Telefonos de Mexico SA Series L - ADR 67,800 5,043
Telefonos de Mexico SA Series L NPV 1,126,900 4,158
Tubos de Acero de Mexico SA NPV 32,000 370
TV Azteca SA de CV - ADR (a) 7,500 39
Vitro SA NPV 279,000 396
--------
39,212
--------
Pakistan - 0.3%
Crescent Textile Mills 52,208 12
Dandot Cement Co. (a) 35,000 1
Fauji Fertilizer 151,100 149
Hub Power Co. - GDR (a) 433,800 153
Pakistan State Oil 51,563 124
Pakistan Telecommunications Corp. - GDS (a) 14,664 594
Sui Northern Gas Pipelines (a) 187,401 34
Sui Southern Gas Co., Ltd. (a) 198,154 38
--------
1,105
--------
Philippines - 1.0%
Aboitiz Equity Ventures (a) 3,082,800 188
Ayala Corp. 847,884 230
Belle Corporation (a) 812,000 77
Belle Corporation 2000 Warrants (a) 56,640 1
C & P Homes, Inc. (a) 1,071,000 21
EEI Corp. (a) 840,800 22
Far East Bank & Trust Co. 99,220 154
Filinvest Development Corp. (a) 463,100 36
JG Summit Holdings, Inc. Series B (a) 2,197,300 186
Manila Electric Co. Class B 118,980 354
Metro Pacific Corp. Class A (a) 1,042,720 38
Metropolitan Bank & Trust Co. 37,406 309
Petron Corp. 1,405,040 126
Philippine Long Distance Telephone Co. - ADR 32,300 765
Robinson's Land Corp. Class B (a) 2,264,400 171
San Miguel Corp. Class B 216,942 353
Security Bank Corp. (a) 121,186 97
SM Prime Holdings 1,309,900 240
Universal Robina 657,100 117
--------
3,485
--------
Poland - 0.8%
Agora SA - GDR (a) 4,300 46
Bank Handlowy W. Warszawie 50,170 726
Bank Rozwoju Eksportu SA 17,225 564
Debica SA 9,732 118
Elektrim Spolka Akcyjna SA (a) 21,395 269
Annual Report 13
<PAGE>
SSgA
Emerging Markets Fund
Statement of Net Assets, continued
August 31, 1999
Market
Number Value
of (000)
Shares $
------ ------
Exbud SA (a) 17,362 162
KGHM Polska Miedz SA - GDR 9,000 116
Okocimskie Zaklady Piwowarskie SA (a) 11,038 56
Prokom Software SA 4,205 119
Telekomunikacja Polska SA Series A - GDR 53,620 357
Zywiec SA (Austrian Shares) 1,355 157
--------
2,690
--------
Russia - 1.4%
AO Tatneft - ADR 21,000 75
Lukoil Oil Co. - ADR 54,200 1,619
Megionneftegaz (Regd)(a) 24,300 15
Mosenergo - ADR 95,100 276
Surgutneftegaz - ADR 256,400 1,982
Unified Energy Systems - GDR 83,400 581
--------
4,548
--------
South Africa - 12.1%
AECI, Ltd. 367,402 984
Amalgamated Banks of South Africa 262,867 1,352
Anglo American PLC (a) 70,832 3,897
AngloGold, Ltd. 30,542 1,531
Anglovaal Industries, Ltd. 610,939 412
Anglovaal Mining, Ltd. 79,000 609
Aveng, Ltd. (a) 610,939 643
Bidvest Group, Ltd. 195,306 1,399
Billiton PLC 123,712 502
C.G. Smith, Ltd. (a) 79,800 212
Coronation Holdings, Ltd. Class N 27,000 454
De Beers Centenary AG 120,144 3,277
Del Monte Royal Food, Ltd. (a) 1,008,639 771
Dimension Data Holdings, Ltd. (a) 145,900 605
Driefontein Consolidated 39,200 135
FirstRand, Ltd. 573,700 582
Foschini, Ltd. (a) 269,200 664
Genbel Securities, Ltd. 55,300 379
Gencor, Ltd. 492,200 1,593
Gold Fields of South Africa, Ltd. 179,000 344
Impala Platinum Holdings, Ltd. 34,600 1,109
Imperial Holdings, Ltd. (a) 41,600 381
Investec Group, Ltd. 37,400 1,303
Iscor 3,094,551 1,154
Liberty Life Association of Africa 218,700 2,562
Liberty Life Strategic 92,707 158
Metropolitan Life, Ltd. 131,100 168
Nedcor Investment Bank Holdings 97,239 70
Nedcor, Ltd. 97,239 1,933
Persetel Holdings, Ltd. 97,500 604
Rembrandt Group, Ltd. 325,294 2,438
Reunert, Ltd. 527,500 672
RMB Holdings, Ltd. 142,800 211
Safmarine & Rennies Holdings, Ltd. 905,300 568
Sanlam, Ltd. (a) 516,370 615
Sappi, Ltd. 189,132 1,744
Sasol NPV 164,346 1,194
South African Breweries PLC (a) 156,483 1,286
Standard Bank Investment Corporation, Ltd. 350,700 1,095
Tiger Oats, Ltd. 57,200 489
Tongaat-Hulett Group, Ltd. 67,719 332
--------
40,431
--------
14 Annual Report
<PAGE>
SSgA
Emerging Markets Fund
Statement of Net Assets, continued
August 31, 1999
Market
Number Value
of (000)
Shares $
------ ------
South Korea - 15.5%
Cho Hung Bank (a) 51,920 280
Daegu Bank (a) 78,820 338
Daewoo Corp. 165,920 260
Daewoo Electronics Co. (a) 119,710 220
Daewoo Heavy Industries 65,000 103
Daewoo Securities (a) 53,000 974
Dong-Ah Construction Industrial Co. (a) 36,150 329
Dongwon Securities 18,590 454
Hana Bank 60,720 540
Hanjin Heavy Industries (a) 83,020 781
Hansol Paper Co. (a) 55,827 757
Hanvit Bank - GDR 90,700 727
Housing & Commercial Bank, Korea (a) 63,540 1,486
Hyosung T&C Co. (a) 32,850 634
Hyundai Engineering & Construction (a) 40,210 358
Hyundai Merchant Marine 75,025 1,157
Hyundai Motor Co., Ltd. (a) 35,148 1,090
Isu Chemical Co., Ltd. (a) 31,840 475
Kookmin Bank 85,179 1,191
Koram Bank 62,000 493
Korea Chemical Co., Ltd. (a) 9,500 747
Korea Electric Power Corp. 97,000 3,615
Korea Telecom Corp. 24,000 1,504
Korea Telecom Corp. - ADR (a) 12,600 410
Korean Air (a) 28,150 560
LG Information & Communication (a) 8,440 754
LG Cable & Machinery 44,000 1,006
LG Chemical, LTD. 33,000 1,054
LG Electronics 76,000 3,219
LG Securities (a) 33,560 583
Namhae Chemical Corp. (a) 31,902 1,130
Nong Shim Co., Ltd. (a) 9,950 617
Pohang Iron & Steel Co., Ltd. 18,540 2,481
Samsung Co. (a) 37,180 655
Samsung Display Devices Co. (a) 18,730 1,084
Samsung Electronics 51,261 9,727
Samsung Fire & Marine Insurance (a) 20,000 988
Samsung Heavy Industries (a) 162,042 1,496
Samsung Securities Co., Ltd. 48,580 1,905
Seoul Horizon Trust (a) 5,000 66
Shin Young Securities 19,010 348
Shinsegae Department Store Co. (a) 17,760 1,398
Sindo Ricoh Co. 18,431 718
SK Telecomm Co., Ltd. 753 753
Ssangyong Cement Co., Ltd. (a) 112,531 501
Ssangyong Oil Refining Co., Ltd. 38,430 954
Tae Kwang Industry Co. (a) 900 376
Taehan Electric Wire Co. 60,000 827
--------
52,123
--------
Sri Lanka - 0.8%
Aitken Spence & Co., Ltd. 117,200 193
Asian Hotel Corp. (a) 176,200 17
Blue Diamond Jewel NPV (a) 260,136 2
Central Finance Co. 25,600 60
Colombo Dockyards, Ltd. 114,700 28
Development Finance Corp. of Ceylon 393,866 662
Hayleys, Ltd. 162,522 240
John Keells Holdings, Ltd. 517,611 1,246
Lanka Ceramic (a) 46,300 10
Lanka Milk Food (a) 21,600 3
Lanka Orix Leasing Co., Ltd. 14,880 8
Merchant Bank of Sri Lanka (a) 162,800 9
National Development Bank, Ltd. 94,000 158
Richard Pieris & Co., Ltd. 2,260 2
United Motor 32,160 15
--------
2,653
--------
Annual Report 15
<PAGE>
SSgA
Emerging Markets Fund
Statement of Net Assets, continued
August 31, 1999
Market
Number Value
of (000)
Shares $
------ ------
Taiwan - 8.8%
Acer, Inc. (a) 471,256 1,008
Advanced Semiconductor Engineering, Inc. (a) 199,260 598
Ambassador Hotel (a) 256,992 122
Asia Cement Corp. 689,920 555
Asustek Computer, Inc. 112,000 1,205
BES Engineering Corp. (a) 916,900 304
Cathay Construction Corp. 613,200 293
Cathay Life Insurance 659,335 1,980
Chang Hwa Bank 188,000 234
Chia Hsin Flour (a) 32,320 11
China Bills Finance Corp. (a) 543,000 213
China Development Industrial Bank (a) 822,023 1,435
China Development Industrial Bank Rights (a) 632,325 31
China Life Insurance Co, Ltd. (a) 236,500 160
China Rebar (a) 27,253 10
China Steel Corp. (a) 1,830,569 1,428
Chinatrust Commercial Bank (a) 595,080 595
Compal Electronics, Inc. 394,050 1,320
Delta Electronics, Inc. 103,200 420
Ensure Co., Ltd. (a) 151,008 72
Evergreen Marine Corp. (a) 125,280 130
Far Eastern Department Stores, Ltd. 690,120 352
Far Eastern Textile 413,941 600
First Commercial Bank 132,000 207
Formosa Chemicals & Fibre Corp. 393,120 396
Formosa Plastics Corp. 344,540 661
Formosa Taffeta Co. 916,240 570
Fubon Insurance Co. 293,700 282
Hon Hai Precision Industry (a) 116,200 756
Hua Nan Bank 363,079 599
Hualon Teijran (a) 29,184 8
International Commercial Bank of China 489,500 565
Inventec Co., Ltd. (a) 79,200 203
Lealea Enterprise (a) 33,772 14
Lite-On Electronics, Inc. 210,240 328
Mosel Vitelic, Inc. (a) 743,000 706
Nan Ya Plastic Corp. 782,550 1,292
Pacific Electrical Wire & Cable (a) 508,050 262
Prince Housing Development (a) 758,587 205
Ritek, Inc. (a) 65,999 405
Ritek, Inc. Rights (a) 44,000 22
Taichung Commercial Bank (a) 710,000 255
Taipei Business Bank (a) 496,315 588
Taiwan Cement Corp. 160,600 105
Taiwan Semiconductor Manufacturing Co. (a) 857,968 3,642
Tatung Co., Ltd. (a) 676,260 819
Teco Electric & Machinery (a) 455,575 375
United Microelectronics Corp., Ltd. (a) 468,400 1,193
Walsin Lihwa Wire (a) 1,131,032 551
Winbond Electronics Corp. (a) 180,000 334
Yageo Corp. 677,100 718
Yang Ming Marine Transport (a) 352,000 200
Yue Loong Motor 270,934 257
Yuen Foong Yu Manufacturing (a) 17,405 7
--------
29,601
--------
16 Annual Report
<PAGE>
SSgA
Emerging Markets Fund
Statement of Net Assets, continued
August 31, 1999
Market
Number Value
of (000)
Shares $
------ ------
Thailand - 0.7%
BEC World PLC, Ltd. (Alien Market) 62,800 374
Finance One Public Co., Ltd. (Alien Market)(a)(d) 158,300 0
PTT Exploration and Production PLC, Ltd. (Alien
Market)(a) 57,800 456
Shinawatra Computer Co., Ltd. (Alien Market)(a) 69,900 319
Siam Cement Co. (Alien Market)(a) 11,800 305
Siam Commercial Bank 2002 Warrants (a) 465,000 209
Siam Makro PLC (Alien Market) 92,300 173
TelecomAsia (Alien Market)(a) 405,000 388
--------
2,224
--------
Turkey - 3.6%
Akansa Cimento AS 7,934,000 109
Akbank 63,103,176 836
Alcatel Teletas Telekomunikasyon
Endustri ve Ticaret AS 2,078,000 112
Anadolu Isuzu Otom 7,490,000 156
Arcelik (a) 17,473,600 402
Aselsan Elektronik Sanayi Ve Ticaret AS (a) 10,987,500 284
Brisa Bridgestone Sabanci Lastik San. Ve Tic AS 9,898,000 213
Cukurova Elektrik AS 240,000 154
Dogan Sirketler Grubu Holding AS 50,953,000 606
Eregli Demir Ve Celik Fabrikalari (a) 20,657,000 362
Haci Omer Sabanci Holding AS 50,588,000 1,102
Izmir Demir Celik Sanayii AS (a) 27,929,090 72
Koc Holding AS 13,244,000 1,011
Mardin Cimento Sanayii Ve Ticaret 18,730,050 219
Medya Holdings Class C (a) 86,652,000 199
Migros 1,119,000 446
Petrokimya Holdings 31,395,000 374
Petrol Ofisi 1,099,000 241
Petrol Ofisi AS Rights (a) 1,099,000 442
Sasa Suni Ve Sente 12,772,000 189
T Sise Cam 16,774,672 164
Turkiye Garanti Bankasi AS (a) 145,064,400 977
Turkiye Is Bankasi 125,336,896 1,914
Yapi ve Kredi Bankasi 112,842,252 1,468
--------
12,052
--------
Venezuela - 0.6%
Banco Provincial SA 200,000 161
Banco Venezolano de Credito 37,351 113
Companhia Anonima Nacional Telefonos de
Venezuela - ADR 22,400 447
Electricidad de Caracas (Regd) 1,976,630 567
F.V.I. Fondo de Valores Inmobiliarios S.A.C.A.
Series B 2,750,410 45
Manufacturas de Papel CA 2,567,930 87
Mavesa SA 2,019,899 96
Siderurgica Venezolana Sivensa S.A.C.A. - ADR 22,600 40
Venezolana de Cementos S.A.C.A. 1,021,980 288
--------
1,844
--------
Total Common Stocks
(cost $266,837) 285,212
--------
Annual Report 17
<PAGE>
SSgA
Emerging Markets Fund
Statement of Net Assets, continued
August 31, 1999
Market
Number Value
of (000)
Shares $
------ ------
Preferred Stocks - 5.5%
Brazil - 4.4%
Acos Villares SA NPV (a) 1,000,000 10
Banco Bradesco SA NPV 217,521,056 860
Banco do Estado de Sao Paulo NPV 40,285,800 1,247
Banco Itau SA NPV (p) 1,431,100 663
Caemi Mineracao e Metalurgia SA NPV 8,192,000 260
Ceval Alimentos SA NPV (a) 61,288,800 113
CIA Energetica De Minas Gerais 38,731,944 596
Companhia Siderurgica Belgo-Mineira NPV 15,306,000 494
Companhia Siderurgica de Tubarao (a) 42,175,232 373
Companhia Vale Do Rio Doce Series A NPV 109,865 2,435
Companmia Cervejaria Brahma NPV 694,000 367
Copene Petroquimica do Nordestse Series A (Regd) 3,718,341 577
Electrobras Series B NPV 6,501,000 103
Embratel Participacoes SA NPV 49,879,200 522
Petroleo Brasileiro SA NPV 18,292,500 2,446
Tele Centro Sul Participacoes SA NPV 36,029,000 384
Tele Norte Leste Participacoes SA NPV 65,629,000 1,059
Tele Sudeste Celular Participacoes SA NPV 61,929,000 293
Telecomunicacoes de Minas Gerais Class B NPV 1,000,000 23
Telecomunicacoes de Sao Paulo SA NPV 596,458 52
Telecomunicacoes do Parana SA NPV 1,640,000 256
Telecomunicacoes do Rio de Janeiro SA NPV (a) 7,900,000 112
Telesp Celular Participacoes SA NPV 46,481,000 423
Telesp Celular SA Class B NPV 596,458 27
Telesp Participacoes SA NPV 40,300,000 665
UNIPAR SA Class B 580,226 148
Votorantim Celulose e Papel SA - ADR 15,500,000 484
--------
14,992
--------
Greece - 0.2%
Delta Dairy SA 23,084 621
--------
South Korea - 0.7%
Samsung Electronics, Ltd. (a) 17,050 2,427
--------
Thailand - 0.2%
Siam Commercial Bank 465,000 528
--------
Total Preferred Stocks
(cost $18,196) 18,568
--------
18 Annual Report
<PAGE>
SSgA
Emerging Markets Fund
Statement of Net Assets, continued
August 31, 1999
Principal Market
Amount Value
(000) (000)
$ $
--------- ------
Long-Term Investments - 0.2%
Chile - 0.1%
Five Arrows Chile Investment Trust (conv.)
3.500% due 11/13/40 220 493
--------
Philippines - 0.1%
Ayala Corp. (conv.)
3.000% due 06/08/00 232 283
--------
South Africa - 0.0%
Anglovaal Industries (conv.)
5.000% due 12/31/99 ZAR 29 1
Anglovaal Industries
5.000% due 12/31/99 ZAR 29 1
--------
2
--------
Total Long-Term Investments
(cost $856) 778
--------
Short-Term Investments - 5.2%
United States - 5.2%
AIM Short-Term Investment
Prime Portfolio Class A (b) $6,581 6,581
Federated Investors Prime
Cash Obligations Fund (b) 5,357 5,357
Ford Motor Credit Co. (MTN)
5.347% due 06/08/00 (c) 3,000 3,003
Key Bank NA (MTN)
5.720% due 07/17/00 (c) 2,500 2,498
--------
Total Short-Term Investments
(cost $17,444) 17,439
--------
Total Investments - 95.9%
(identified cost $303,333) 321,997
Other Assets and Liabilities,
Net - 4.1% 13,658
--------
Net Assets - 100.0% 335,655
========
(a) Nonincome-producing security.
(b) At cost, which approximates market.
(c) Held as collateral in connection with equity swap agreements held by the
Fund.
(d) These securities have been valued by the Security Valuation Committee of
the Board of Trustees. It is possible that the estimated value may differ
significantly from the amount that might ultimately be realized.
Abbreviations:
ADR - American Depositary Receipt
GDR - Global Depositary Receipt
GDS - Global Depositary Share
LIBOR - London Interbank Offered Rate
NPV - No Par Value
NV - Nonvoting
144A - Represents private placement security for qualified buyers according to
rule 144A of the Securities Act of 1933.
Foreign Currency Abbreviations:
ARS - Argentina peso
EUR - Eurodollar
MXN - Mexican peso
USD - United States dollar
ZAR - South African rand
See the accompanying notes which are an integral part of the financial
statements.
Annual Report 19
<PAGE>
SSgA
Emerging Markets Fund
Statement of Net Assets, continued
August 31, 1999
Unrealized
Number Appreciation
of (Depreciation)
Contracts (000)
--------- --------------
Futures Contracts
MSCI Index Futures Contracts (Taiwan)
expiration date 09/99 499 $ 264
------
Total Unrealized Appreciation
(Depreciation) on Open Futures
Contracts Purchased (ss.) $ 264
======
(ss.) At August 31, 1999, $1,497 cash was held as collateral in connection with
open futures contracts held by the Fund.
Market
% of Value
Net (000)
Industry Diversification Assets $
- ------------------------------------------------------- ------ ------
Basic Industries 10.6% 35,432
Capital Goods 7.0 23,514
Consumer Basics 8.1 27,289
Consumer Durables 2.3 7,746
Consumer Non-Durables 3.9 13,176
Consumer Services 0.4 1,245
Energy 4.2 13,995
Finance 22.4 75,049
General Business 1.4 4,846
Miscellaneous 4.5 15,249
Shelter 2.1 6,996
Technology 9.8 32,874
Transportation 0.6 1,868
Utilities 13.2 44,501
Long-Term Investments 0.2 778
Short-Term Investments 5.2 17,439
----- -------
Total Investments 95.9 321,997
Other Assets and Liabilities, Net 4.1 13,658
----- -------
Net Assets 100.0% 335,655
===== =======
Market
% of Value
Net (000)
Geographic Diversification Assets $
- ------------------------------------------------------- ------ ------
Africa 13.5% 45,370
Europe 13.3 44,678
Latin America 24.6 82,589
Middle East 9.7 32,396
Pacific Basin 29.4 98,747
Long-Term Investments 0.2 778
Short-Term Investments 5.2 17,439
----- -------
Total Investments 95.9 321,997
Other Assets and
Liabilities, Net 4.1 13,658
----- -------
Net Assets 100.0% 335,655
===== =======
See the accompanying notes which are an integral part of the financial
statements.
20 Annual Report
<PAGE>
SSgA
Emerging Markets Fund
Statement of Net Assets, continued
August 31, 1999
Equity Swaps
<TABLE>
<CAPTION>
Notional Unrealized
Amount Appreciation
(000) Termination (Depreciation)
Underlying Security $ Floating Rate Date (000)
- ---------------------------------- -------- ------------------------- ----------- --------------
<S> <C> <C> <C> <C>
IFC Emerging Markets Investable
Total Return Chile Index 3,000 USD LIBOR-BBA minus .25% 06/30/00 (181)
IFC Emerging Markets Investable
India Index 2,500 USD LIBOR-BBA minus 3.05% 07/03/00 552
----
371
====
</TABLE>
See the accompanying notes which are an integral part of the financial
statements.
Annual Report 21
<PAGE>
SSgA
Emerging Markets Fund
Statement of Assets and Liabilities
Amounts in thousands (except per share amount) August 31, 1999
<TABLE>
<S> <C> <C>
Assets
Investments at market (identified cost $303,333) ........................................ $321,997
Cash .................................................................................... 1,497
Foreign currency holdings (identified cost $6,834) ...................................... 6,828
Receivables:
Dividends and interest ............................................................... 724
Investments sold ..................................................................... 84
Fund shares sold ..................................................................... 5,570
Daily variation margin on futures contracts .......................................... 95
Prepaid expenses ........................................................................ 1
Short-term investments held as collateral for securities loaned, at market .............. 20,537
Receivable for equity swaps ............................................................. 689
--------
Total Assets ...................................................................... 358,022
Liabilities
Payables:
Fund shares redeemed ...................................................... $ 1,293
Accrued fees to affiliates ................................................ 537
Payable upon return of securities loaned, at market .......................... 20,537
-------
Total Liabilities ................................................................. 22,367
--------
Net Assets .............................................................................. $335,655
========
Net Assets Consist of:
Undistributed net investment income ..................................................... $ 5,540
Accumulated net realized gain (loss) .................................................... (27,241)
Unrealized appreciation (depreciation) on:
Investments .......................................................................... 18,664
Futures contracts .................................................................... 264
Equity swaps ......................................................................... 371
Foreign currency-related transactions ................................................ (121)
Shares of beneficial interest ........................................................... 32
Additional paid-in capital .............................................................. 338,146
--------
Net Assets .............................................................................. $335,655
========
Net Asset Value, offering and redemption price per share:
($335,655,171 divided by 32,044,118 shares of $.001 par value
shares of beneficial interest outstanding) ........................................ $ 10.47
========
</TABLE>
See the accompanying notes which are an integral part of the financial
statements.
22 Annual Report
<PAGE>
SSgA
Emerging Markets Fund
Statement of Operations
Amounts in thousands For the Fiscal Year Ended August 31, 1999
<TABLE>
<S> <C> <C>
Investment Income
Dividends (net of foreign taxes withheld of $685) .................................... $ 7,499
Interest ............................................................................. 727
--------
Total Investment Income ........................................................... 8,226
Expenses
Advisory fees ............................................................ $ 2,038
Administrative fees ...................................................... 188
Custodian fees ........................................................... 918
Distribution fees ........................................................ 231
Transfer agent fees ...................................................... 75
Professional fees ........................................................ 32
Registration fees ........................................................ 46
Shareholder servicing fees ............................................... 87
Trustees' fees ........................................................... 6
Amortization of deferred organization expenses ........................... 3
Miscellaneous ............................................................ 16
--------
Expenses before reductions ............................................... 3,640
Expense reductions ....................................................... (244)
--------
Expenses, net ..................................................................... 3,396
--------
Net investment income ................................................................... 4,830
--------
Net Realized and Unrealized Gain (Loss)
Net realized gain (loss) on:
Investments .............................................................. (26,488)
Futures contracts ........................................................ 7,000
Equity swaps ............................................................. 11,695
Foreign currency-related transactions .................................... (346) (8,139)
--------
Net change in unrealized appreciation (depreciation) on:
Investments .............................................................. 124,279
Futures contracts ........................................................ 434
Equity swaps ............................................................. 10,421
Foreign currency-related transactions .................................... (69) 135,065
-------- --------
Net realized and unrealized gain (loss) ................................................. 126,926
--------
Net increase (decrease) in net assets resulting from operations ......................... $131,756
========
</TABLE>
See the accompanying notes which are an integral part of the financial
statements.
Annual Report 23
<PAGE>
SSgA
Emerging Markets Fund
Statement of Changes in Net Assets
Amounts in thousands For the Fiscal Year Ended August 31,
<TABLE>
<CAPTION>
1999 1998
--------- ---------
<S> <C> <C>
Increase (Decrease) in Net Assets
Operations
Net investment income ...................................................... $ 4,830 $ 4,927
Net realized gain (loss) ................................................... (8,139) (18,814)
Net change in unrealized appreciation (depreciation) ....................... 135,065 (135,151)
--------- ---------
Net increase (decrease) in net assets resulting from operations ......... 131,756 (149,038)
--------- ---------
Distributions
From net investment income ................................................. (5,742) (3,219)
In excess of net investment income ......................................... (2,477) --
In excess of net realized gain on investments .............................. -- (5,502)
--------- ---------
Net decrease from distributions ......................................... (8,219) (8,721)
--------- ---------
Share Transactions
Net increase (decrease) in net assets from share transactions .............. 5,748 111,421
--------- ---------
Total Net Increase (Decrease) in Net Assets ................................... 129,285 (46,338)
Net Assets
Beginning of period ........................................................ 206,370 252,708
--------- ---------
End of period (including undistributed net investment income of
$5,540 and $912, respectively) .......................................... $ 335,655 $ 206,370
========= =========
</TABLE>
See the accompanying notes which are an integral part of the financial
statements.
24 Annual Report
<PAGE>
SSgA
Emerging Markets Fund
Financial Highlights
The following table includes selected data for a share outstanding throughout
each period and other performance information derived from the financial
statements.
<TABLE>
<CAPTION>
Fiscal Years Ended August 31,
--------------------------------------------------------
1999 1998 1997 1996 1995
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period .................. $ 6.52 $ 12.33 $ 10.87 $ 10.30 $ 11.45
-------- -------- -------- -------- --------
Income From Operations
Net investment income (a) .......................... .15 .18 .12 .11 .14
Net realized and unrealized gain (loss) ............ 4.07 (5.58) 1.51 .68 (1.19)
-------- -------- -------- -------- --------
Total Income From Operations .................... 4.22 (5.40) 1.63 .79 (1.05)
-------- -------- -------- -------- --------
Distributions
From net investment income ......................... (.27) (.15) (.11) (.12) (.10)
From net realized gain on investments .............. -- (.26) (.06) (.10) --
-------- -------- -------- -------- --------
Total Distributions ............................. (.27) (.41) (.17) (.22) (.10)
-------- -------- -------- -------- --------
Net Asset Value, End of Period ........................ $ 10.47 $ 6.52 $ 12.33 $ 10.87 $ 10.30
======== ======== ======== ======== ========
Total Return (%) ...................................... 66.41 (45.36) 15.12 7.83 (9.28)
Ratios/Supplemental Data:
Net Assets, end of period ($ in thousands) ......... 335,655 206,370 252,708 120,216 68,385
Ratios to average net assets (%):
Operating expenses, net (b) ..................... 1.25 1.25 1.25 1.28 1.50
Operating expenses, gross (b) ................... 1.34 1.38 1.51 1.67 1.90
Net investment income ........................... 1.78 1.85 1.07 1.10 1.74
Portfolio turnover rate (%) ........................ 39.64 38.94 15.00 4.36 19.77
</TABLE>
(a) For the period subsequent to August 31, 1998, average month-end shares
outstanding were used for this calculation.
(b) See Note 4 for current period amounts.
Annual Report 25
<PAGE>
SSgA
Emerging Markets Fund
Notes to Financial Statements
August 31, 1999
1. Organization
The SSgA Funds (the "Investment Company") is a series mutual fund,
currently comprised of 23 investment portfolios which are in operation as
of August 31, 1999. These financial statements report on one portfolio,
the SSgA Emerging Markets Fund (the "Fund"). The Investment Company is a
registered and diversified open-end investment company, as defined in the
Investment Company Act of 1940, as amended (the "1940 Act"), that was
organized as a Massachusetts business trust on October 3, 1987 and
operates under a First Amended and Restated Master Trust Agreement, dated
October 13, 1993, as amended (the "Agreement"). The Investment Company's
Agreement permits the Board of Trustees to issue an unlimited number of
full and fractional shares of beneficial interest at a $.001 par value.
2. Significant Accounting Policies
The Fund's financial statements are prepared in accordance with generally
accepted accounting principles which require the use of management
estimates. The following is a summary of the significant accounting
policies consistently followed by the Fund in the preparation of its
financial statements.
Security valuation: International equity and fixed-income securities
traded on a national securities exchange are valued on the basis of the
last sale price. International securities traded over the counter are
valued on the basis of the mean of bid prices. In the absence of a last
sale or mean bid price, respectively, such securities may be valued on the
basis of prices provided by a pricing service if those prices are believed
to reflect the market value of such securities.
Money market instruments maturing within 60 days of the valuation date are
valued at amortized cost, a method by which each portfolio instrument is
initially valued at cost, and thereafter a constant accretion/amortization
to maturity of any discount or premium is assumed, unless the Board of
Trustees determines that amortized cost does not represent fair value.
The Fund may value certain securities for which market quotations are not
readily available at "fair value," as determined in good faith pursuant to
procedures established by the Board of Trustees.
Securities transactions: Securities transactions are recorded on the trade
date basis. Realized gains and losses from the securities transactions are
recorded on the basis of identified cost.
Investment income: Dividend income is recorded on the ex-dividend date and
interest income is recorded daily on the accrual basis.
Amortization and accretion: All zero-coupon bond discounts and original
issue discounts are accreted for both tax and financial reporting
purposes. All short-and long-term market premiums/discounts are
amortized/accreted for both tax and financial reporting purposes.
Federal income taxes: Since the Investment Company is a Massachusetts
business trust, each fund is a separate corporate taxpayer and determines
its net investment income and capital gains (or losses) and the amounts to
be distributed to each fund's shareholders without regard to the income
and capital gains (or losses) of the other funds.
26 Annual Report
<PAGE>
SSgA
Emerging Markets Fund
Notes to Financial Statements, continued
August 31, 1999
It is the Fund's intention to qualify as a regulated investment company,
as defined by the Internal Revenue Code of 1986, as amended. This requires
the Fund to distribute all of its taxable income. Therefore, the Fund paid
no federal income taxes and no federal income tax provision was required.
At August 31, 1999, the Fund had net tax basis capital loss carryovers of
$62,851 and $22,276,310, which may be applied against any realized net
taxable gains in each year or until their expiration dates of August 31,
2006, and August 31, 2007, respectively, whichever occurs first. As
permitted by tax regulations, the Fund intends to defer a net realized
capital loss of $4,775,701 incurred from November 1, 1998 to August 31,
1999, and treat it as arising in fiscal year 2000.
The Fund's aggregate cost of investments and the composition of unrealized
appreciation and depreciation of investment securities for federal income
tax purposes as of August 31, 1999 are as follows:
Net Unrealized
Unrealized Unrealized Appreciation
Federal Tax Cost Appreciation (Depreciation) (Depreciation)
---------------- ------------ -------------- --------------
$300,959,455 $71,512,084 $(50,474,128) $21,037,956
Dividends and distributions to shareholders: Income dividends and capital
gain distributions, if any, are recorded on the ex-dividend date. The Fund
declares and pays dividends annually. Capital gain distributions, if any,
are generally declared and paid annually. An additional distribution may
be paid by the Fund to avoid imposition of federal income tax on any
remaining undistributed net investment income and capital gains.
The timing and characterization of certain income and capital gain
distributions are determined in accordance with federal tax regulations
which may differ from generally accepted accounting principles ("GAAP").
As a result, net investment income and net realized gain (or loss) on
investment and foreign currency-related transactions for a reporting
period may differ significantly from distributions during such period. The
differences between tax regulations and GAAP relate primarily to
investments in options, futures, forward contracts, passive foreign
investment companies, foreign denominated investments, and certain
securities sold at a loss. Accordingly, the Fund may periodically make
reclassifications among certain of its capital accounts without impacting
its net asset value.
Expenses: Most expenses can be directly attributed to the Fund. Expenses
which cannot be directly attributed are allocated among all funds based
principally on their relative net assets.
Deferred organization expenses: The Fund has incurred expenses in
connection with its organization. These costs were deferred and are being
amortized over 60 months on a straight-line basis.
Foreign currency translations: The books and records of the Fund are
maintained in US dollars. Foreign currency amounts and transactions of the
Fund are translated into US dollars on the following basis:
(a) Market value of investment securities, other assets and liabilities
at the closing rate of exchange on the valuation date.
(b) Purchases and sales of investment securities and income at the
closing rate of exchange prevailing on the respective trade dates of
such transactions.
Annual Report 27
<PAGE>
SSgA
Emerging Markets Fund
Notes to Financial Statements, continued
August 31, 1999
Reported net realized gains or losses from foreign currency-related
transactions arise from sales and maturities of short-term securities;
sales of foreign currencies; currency gains or losses realized between the
trade and settlement dates on securities transactions; and the difference
between the amounts of dividends, interest, and foreign withholding taxes
recorded on the Fund's books and the US dollar equivalent of the amounts
actually received or paid. Net unrealized gains or losses from foreign
currency-related transactions arise from changes in the value of assets
and liabilities, other than investments in securities, at fiscal year-end,
resulting from changes in the exchange rates.
It is not practical to isolate that portion of the results of operations
of the Fund that arises as a result of changes in exchange rates from that
portion that arises from changes in market prices of investments during
the year. Such fluctuations are included with the net realized and
unrealized gain or loss from investments. However, for federal income tax
purposes the Fund does isolate the effects of changes in foreign exchange
rates from the fluctuations arising from changes in market prices for
realized gain (or loss) on debt obligations.
Derivatives: To the extent permitted by the investment objectives,
restrictions and policies set forth in the Fund's Prospectus and Statement
of Additional Information, the Fund may participate in various
derivative-based transactions. Derivative securities are instruments or
agreements whose value is derived from an underlying security or index.
They include options, futures, swaps, forwards, structured notes and
stripped securities. These instruments offer unique characteristics and
risks that assist the Fund in meeting its investment strategies.
The Fund typically uses derivatives in three ways: cash equitization,
hedging, and return enhancement. Cash equitization is a technique that may
be used by the Fund through the use of options and futures to earn
"market-like" returns with the Fund's excess and liquidity reserve cash
balances. Hedging is used by the fund to limit or control risks, such as
adverse movements in exchange rates and interest rates. Return enhancement
can be accomplished through the use of derivatives in the Fund. By
purchasing certain instruments, the Fund may more effectively achieve the
desired portfolio characteristics that assist in meeting the Fund's
investment objectives. Depending on how the derivatives are structured and
utilized, the risks associated with them may vary widely. These risks are
generally categorized as market risk, liquidity risk and counterparty or
credit risk.
Foreign currency exchange contracts: In connection with portfolio
purchases and sales of securities denominated in a foreign currency, the
Fund may enter into foreign currency exchange spot contracts and forward
foreign currency exchange contracts ("contracts"). The Fund may enter into
foreign currency forward overlays on liquidity reserve balances.
Additionally, from time to time the Fund may enter into contracts to hedge
certain foreign currency-denominated assets. Contracts are recorded at
market value. Certain risks may arise upon entering into these contracts
from the potential inability of counterparties to meet the terms of their
contracts and are generally limited to the amount of unrealized gain on
the contracts, if any, that are recognized in the accompanying Statement
of Assets and Liabilities. Realized gains or losses arising from such
transactions are included in net realized gain (or loss) from foreign
currency-related transactions. Open forward contracts at August 31, 1999
are presented in the accompanying Statement of Net Assets.
Futures: The Fund is currently utilizing exchange-traded futures
contracts. The primary risks associated with the use of futures contracts
are an imperfect correlation between the change in market value of the
securities held by the Fund and the prices of futures contracts and the
possibility of an illiquid market. Changes in initial settlement
28 Annual Report
<PAGE>
SSgA
Emerging Markets Fund
Notes to Financial Statements, continued
August 31, 1999
value are accounted for as unrealized appreciation (depreciation) until
the contracts are terminated, at which time realized gains and losses are
recognized.
Equity Swaps: The Fund has entered into several equity swap agreements in
order to efficiently participate in certain foreign markets. Pursuant to
these agreements, the Fund pays the swap counterparties based on the
notional amount and an agreed upon rate (i.e. the 12-month USD LIBOR BBA
rate). During the terms of the agreements, changes in the underlying
values of the swaps are recorded as unrealized gain (loss) and are based
on changes in the value of the underlying index. The underlying index is
valued at the published daily closing price. Accrued interest expense to
be paid to the swap counterparties or accrued interest income to be paid
to the Fund, at the agreed upon dates, are recognized as unrealized gain
(loss). Amounts paid to the swap counterparties representing capital
depreciation on the underlying securities and accrued interest expense and
interest income are recorded as net realized gain (loss). The Fund is
exposed to credit risk in the event of non-performance by the swap
counterparties; however, the Fund does not anticipate non-performance by
the counterparties. The Fund has segregated certain short-term investments
(identified in the accompanying Statement of Net Assets) as collateral for
the notional amount under the equity swap agreements.
Investment in emerging markets: Investing in emerging markets may involve
special risks and considerations not typically associated with investing
in the United States markets. These risks include revaluation of
currencies, high rates of inflation, repatriation, restrictions on income
and capital, and future adverse political and economic developments.
Moreover, securities issued in these markets may be less liquid, subject
to government ownership controls, delayed settlements, and their prices
more volatile than those of comparable securities in the United States.
3. Securities Transactions
Investment transactions: For the year ended August 31, 1999, purchases and
sales of investment securities, excluding short-term investments and
futures contracts, aggregated to $141,683,857 and $94,901,370,
respectively.
Futures transactions: The Fund's transactions in futures contracts for the
year ended August 31, 1999 were as follows:
Futures Contracts
-----------------------------
Aggregate
Number of Face Value of
Contracts Contracts (1)
--------- -------------
Outstanding at August 31, 1998 262 $ 6,458,289
Contracts opened 6,805 212,000,139
Contracts closed (6,568) (200,593,898)
------- -------------
Outstanding at August 31, 1999 499 $ 17,864,530
======= =============
(1) The aggregate face value of contracts is computed on the date each
contract was opened.
Securities Lending: Effective December 17, 1998, the Investment Company
started its securities lending program. The program allows each Fund to
loan securities with a value up to 33 1/3% of its total assets to certain
Annual Report 29
<PAGE>
SSgA
Emerging Markets Fund
Notes to Financial Statements, continued
August 31, 1999
brokers. The Fund receives cash (U.S. currency), U.S. Government or U.S.
Government agency obligations as collateral against the loaned securities.
To the extent that a loan is secured by cash collateral, such collateral
shall be invested by State Street Bank and Trust Company in short-term
instruments, money market mutual funds, and such other short-term
investments, provided the investments meet certain quality and
diversification requirements. Under the securities lending arrangement,
the collateral received is recorded on the Fund's statement of assets and
liabilities along with the related obligation to return the collateral. In
those situations where the Company has relinquished control of securities
transferred, it derecognizes the securities and records a receivable from
the counterparty.
Income generated from the investment of cash collateral, less negotiated
rebate fees paid to participating brokers and transaction costs, is
divided between the Fund and State Street Bank and Trust Company and is
recorded as interest income for the Fund. To the extent that a loan is
secured by non-cash collateral, brokers pay the Fund negotiated lenders'
fees, which are divided between the Fund and State Street Bank and Trust
Company and are recorded as interest income for the Fund. All collateral
received will be in an amount at least equal to 102% (for loans of U.S.
securities) or 105% (for non-U.S. securities) of the market value of the
loaned securities at the inception of each loan. Should the borrower of
the securities fail financially, there is a risk of delay in recovery of
the securities or loss of rights in the collateral. Consequently, loans
are made only to borrowers which are deemed to be of good financial
standing. As of August 31, 1999, the value of outstanding securities on
loan and the value of collateral amounted to $19,426,817 and $20,537,423,
respectively. The Fund recorded securities lending income of $97,214
during the year.
4. Related Parties
Adviser: The Investment Company has an investment advisory agreement with
State Street Bank and Trust Company under which the Adviser directs the
investments of the Fund in accordance with its investment objectives,
policies, and limitations. For these services, the Fund pays a fee to the
Adviser, calculated daily and paid monthly, at the annual rate of .75% of
its average daily net assets. Effective November 1, 1995, the Adviser
voluntarily agreed to reimburse the Fund for all expenses in excess of
1.25% of its average daily net assets on an annual basis. As of August 31,
1999, the receivable due from the Adviser for expenses in excess of the
expense cap has been netted against the Advisory fee payable. The
Investment Company also has contracts with the Adviser to provide custody,
shareholder servicing and transfer agent services to the Fund. These
amounts are presented in the accompanying Statement of Operations. The
Fund recorded securities lending income of $97,214 during the year.
In addition, the Fund has entered into arrangements with its Adviser
whereby credits realized as a result of uninvested cash balances were used
to reduce a portion of the Fund's expenses. During the year, the Fund's
custodian fees were reduced by $6,957 under these arrangements.
Administrator: The Investment Company has an administration agreement with
Frank Russell Investment Management Company (the "Administrator"), a
wholly owned subsidiary of The Northwestern Mutual Life Insurance Company,
under which the Administrator supervises all non-portfolio investment
aspects of the Investment Company's operations and provides adequate
office space and all necessary office and services, including telephone
service, utilities, stationery supplies, and similar items. The Investment
Company pays the Administrator the following fees for services supplied by
the Administrator pursuant to the Administration
30 Annual Report
<PAGE>
SSgA
Emerging Markets Fund
Notes to Financial Statements, continued
August 31, 1999
Agreement: (i) an annual fee, payable monthly on a pro rata basis, based
on the following percentages of the average daily net assets of all
international funds; $0 up to and including $500 million - .07%, over $500
million to and including $1 billion - .06%, over $1 billion to and
including $1.5 billion - .04%, over $1.5 billion - .03%, and (ii) less an
amount equal to the sum of certain distribution-related expenses incurred
by the Investment Company's Distributor on behalf of the Fund (up to a
maximum of 10% for the period September 1, 1997 to December 31, 1997 up to
a maximum of 5% for January 1, 1998 to December 31, 1998 and 0%
thereafter, of the asset-based fee determined in (i)). In addition, the
Fund reimburses the Administrator for out-of-pocket expenses and start-up
costs for new funds.
Distributor and Shareholder Servicing: The Investment Company has a
Distribution Agreement with Russell Fund Distributors (the "Distributor")
which is a wholly-owned subsidiary of the Administrator to promote and
offer shares of the Investment Company. The Distributor may enter into
sub-distribution agreements with other non-related parties. The amounts
paid to the Distributor are included in the accompanying Statement of
Operations.
The Investment Company has a Distribution Plan pursuant to Rule 12b-1 (the
"Plan") under the 1940 Act. Under this Plan, the Investment Company is
authorized to make payments to the Distributor, or any Shareholder
Servicing Agent, as defined in the Plan, for providing distribution and
marketing services, for furnishing assistance to investors on an ongoing
basis, and for the reimbursement of direct out-of-pocket expenses charged
by the Distributor in connection with the distribution and marketing of
shares of the Investment Company and the servicing of investor accounts.
The Fund has service agreements with the Adviser, State Street Brokerage
Services, Inc. ("SSBSI"), a wholly-owned subsidiary of the Adviser, the
Adviser's Retirement Investment Services Division ("RIS"), the Adviser's
Metropolitan Division of Commercial Banking ("Commercial Banking") and
State Street Solutions ("Solutions")(collectively the "Agents"), as well
as several unaffiliated service providers. For these services, the Fund
pays .025%, .175%, .175%, .175% and .175%, to the Adviser, SSBSI, RIS,
Commercial Banking, and Solutions, respectively, based upon the average
daily value of all Fund shares held by or for customers of these Agents.
For the year ended August 31, 1999, the Fund was charged shareholder
servicing expenses of $66,597, $2,824, $9,260, $565 and $3,773 by the
Adviser, SSBSI, RIS, Commercial Banking, and Solutions, respectively.
The combined distribution and shareholder servicing payments shall not
exceed .25% of the average daily value of net assets on an annual basis.
The shareholder servicing payments shall not exceed .20% of the average
daily value of net assets on an annual basis. Any payments that exceed the
maximum amount of allowable reimbursement may be carried forward for two
years following the year in which the expenditure was incurred so long as
the plan is in effect. The Fund's responsibility for any such expenses
carried forward shall terminate at the end of two years following the year
in which the expenditure was incurred. The Trustees or a majority of the
Fund's shareholders have the right, however, to terminate the Distribution
Plan and all payments thereunder at any time. The Fund will not be
obligated to reimburse the Distributor for carryover expenses subsequent
to the Distribution Plan's termination or noncontinuance. There were no
carryover expenses as of August 31, 1999.
Board of Trustees: Through May 31, 1999, the Investment Company paid each
Trustee not affiliated with the Investment Company a retainer of $48,000
annually, $1,500 for each board meeting attended, an additional $1,500
Annual Report 31
<PAGE>
SSgA
Emerging Markets Fund
Notes to Financial Statements, continued
August 31, 1999
for attending the annual audit committee meeting, and reimbursement for
out-of-pocket expenses. As of June 1, 1999, each Trustee receives $2,500
for each board meeting attended, an additional $2,500 for attending the
annual audit committee meeting and $2,500 for the valuation committee fee
in addition to the $48,000 annual retainer. These expenses are allocated
among all of the Funds based upon their relative net assets.
Accrued fees payable to affiliates and trustees as of August 31, 1999 were
as follows:
Advisory fees $370,313
Administration fees 19,971
Custodian fees 105,026
Distribution fees 9,439
Shareholder servicing fees 11,729
Transfer agent fees 19,207
Trustees' fees 954
--------
$536,639
========
Beneficial Interest: As of August 31, 1999, one shareholder was a record
owner of approximately 42% of the total outstanding shares of the Fund.
5. Fund Share Transactions (amounts in thousands)
<TABLE>
<CAPTION>
Fiscal Years Ended August 31,
------------------------------------------------
1999 1998
---------------------- ----------------------
Shares Dollars Shares Dollars
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Proceeds from shares sold ........................ 25,947 $ 225,323 24,649 $ 244,575
Proceeds from reinvestment of distributions ...... 993 7,446 663 8,156
Payments for shares redeemed ..................... (26,560) (227,021) (14,139) (141,310)
--------- --------- --------- ---------
Total net increase (decrease) .................... 380 $ 5,748 11,173 $ 111,421
========= ========= ========= =========
</TABLE>
6. Line of Credit
The Fund and several affiliated Funds (the "Participants") share in a $50
million revolving credit facility for temporary or emergency purposes,
including the meeting of redemption requests that otherwise might require
the untimely disposition of securities. The Participants are charged an
annual commitment fee of .09% (.065% prior to July 15, 1999) on the
average daily unused amount of the aggregate commitment, which is
allocated among each of the Participants. Interest, at the Federal Fund
Rate plus .50% annually, is calculated based on the market rates at the
time of the borrowing. The Fund may borrow up to a maximum of 33 1/3
percent of the value of it's net assets under the agreement. The Fund did
not have any drawdowns during the year.
32 Annual Report
<PAGE>
SSgA
Emerging Markets Fund
Tax Information
August 31, 1999 (Unaudited)
The Fund paid foreign taxes of $685,121 and recognized $7,164,437 of foreign
source income during the taxable year ended August 31, 1999. Pursuant to Section
853 of the Internal Revenue Code, the Fund designates $.0214 per share of
foreign taxes paid and $.2236 of gross income earned from foreign sources in the
taxable year ended August 31, 1999.
Please consult a tax advisor for questions about federal or state income tax
laws.
Annual Report 33
<PAGE>
SSgA Emerging Markets Fund
One International Place, 27th Floor
Boston, Massachusetts 02110
(800) 997-7327
- --------------------------------------------------------------------------------
Trustees
Lynn L. Anderson, Chairman
William L. Marshall
Steven J. Mastrovich
Patrick J. Riley
Richard D. Shirk
Bruce D. Taber
Henry W. Todd
Officers
Lynn L. Anderson, President, Treasurer and CEO
Mark E. Swanson, Assistant Secretary, Assistant
Treasurer and Principal Accounting Officer
J. David Griswold, Vice President and Secretary
Deedra S. Walkey, Assistant Secretary
Rick J. Chase, Assistant Secretary
Carla L. Anderson, Assistant Secretary
Investment Adviser
State Street Bank and Trust Company
225 Franklin Street
Boston, Massachusetts 02110
Custodian, Transfer Agent and
Office of Shareholder Inquiries
State Street Bank and Trust Company
1776 Heritage Drive
North Quincy, Massachusetts 02171
(800) 647-7327
Distributor
Russell Fund Distributors, Inc.
One International Place, 27th Floor
Boston, Massachusetts 02110
(800) 997-7327
Administrator
Frank Russell Investment Management Company
909 A Street
Tacoma, Washington 98402
Legal Counsel
Goodwin, Procter & Hoar LLP
Exchange Place
Boston, Massachusetts 02109
Independent Accountants
PricewaterhouseCoopers LLP
160 Federal Street
Boston, Massachusetts 02110
34 Annual Report
<PAGE>
SSgA(R) Funds
Tuckerman Active REIT Fund
Annual Report
August 31, 1999
Table of Contents
Page
Chairman's Letter............................................. 4
Portfolio Management Discussion and Analysis.................. 6
Report of Independent Accountants............................. 8
Financial Statements.......................................... 9
Financial Highlights.......................................... 14
Notes to Financial Statements................................. 15
Matters Submitted to a Vote of Shareholders................... 20
Fund Management and Service Providers......................... 21
"SSgA(R)" is a registered trademark of State Street Corporation and is licensed
for use by the SSgA Funds.
This report is prepared from the books and records of the Fund and it is
submitted for the general information of shareholders. This information is for
distribution to prospective investors only when preceded or accompanied by a
SSgA Funds Prospectus containing more complete information concerning the
investment objective and operations of the Fund, charges and expenses. The
Prospectus should be read carefully before an investment is made.
Performance is historical and assumes reinvestment of all dividends and capital
gains. Investment return and principal value will fluctuate so that an
investor's shares, when redeemed, may be worth more or less than when purchased.
Past performance is not indicative of future results. Russell Fund Distributors,
Inc., is the distributor of the SSgA Funds.
<PAGE>
SSgA Tuckerman Active REIT Fund
- --------------------------------------------------------------------------------
Letter From the Chairman of State Street Global Advisors
- --------------------------------------------------------------------------------
Dear Shareholders,
It is my pleasure to provide you with the SSgA Funds annual report for the
fiscal year ended August 31, 1999. The SSgA Fund family has grown to include
twenty-three portfolios covering a broad range of investment strategies. The
enclosed information provides an overview of the investment process for the SSgA
Tuckerman Active REIT Fund. This overview contains market updates, performance,
and financial information for the Fund. I hope you will find this information a
useful reference as you review your investment strategy.
During the past fiscal year, the SSgA Fund family has opened two new Funds. The
names and investment objectives for these funds are as follows:
The SSgA Aggressive Equity Fund seeks to maximize total return through investing
in US equity securities that are undervalued relative to their growth potential
as measured by SSgA's proprietary models.
The SSgA IAM Shares Fund seeks to maximize total return by investing primarily
in equity securities of companies that have entered into collective bargaining
agreements with the International Association of Machinists and Aerospace
Workers or affiliated labor unions.
Additionally, three SSgA Funds achieved a five-year track record during the 1999
fiscal year. These funds include the two institutional money market funds, SSgA
US Treasury and SSgA Prime Money Market Funds and the SSgA Emerging Markets
Fund. We are proud of our long-term record and look forward to having additional
funds complete their five-year anniversary.
In today's complex global marketplace, we are continually researching new
products and ideas to introduce to our fund family. Here at SSgA, we are
committed to providing a wide range of competitive investment vehicles to
fulfill your investment needs.
I would like to thank you for choosing the SSgA Funds.
Sincerely,
/s/ Nicholas A. Lopardo
Nicholas A. Lopardo
State Street Global Advisors
Chairman and Chief Executive Officer
4 Annual Report
<PAGE>
SSgA Tuckerman Active REIT Fund
- --------------------------------------------------------------------------------
Management of the Funds
- --------------------------------------------------------------------------------
[PHOTO]
Nicholas A. Lopardo
Chairman and Chief Executive Officer
A Team Approach to Investment Management
Our investment strategies are the product of the combined experience of our
professional staff. Portfolio Managers work together to develop and enhance the
techniques that drive our investment processes. As a result, the portfolios we
manage benefit from the knowledge of the entire team.
Mr. David B. Smith, CFA, Principal, has been the portfolio manager primarily
responsible for investment decisions regarding the SSgA Tuckerman Active REIT
Fund since its inception in April 1998. Mr. Smith joined State Street Global
Advisors in 1990, and as a senior equity analyst and portfolio manager, he
specializes in Real Estate Investment Trusts (REITs). Prior to his current
responsibilities, Mr. Smith covered REITs and the financial services market
segment, which includes banks, thrifts, insurance companies, credit card
business and asset management firms. There are two other portfolio managers
working with Mr. Smith.
Annual Report 5
<PAGE>
SSgA Tuckerman Active REIT Fund
- --------------------------------------------------------------------------------
Portfolio Management Discussion and Analysis
- --------------------------------------------------------------------------------
Objective: Provide income and capital growth by investing primarily in publicly
traded securities of real estate companies.
Invests in: At least 65% of the Fund's total assets in equity interests in Real
Estate Investment Trust securities contained in the Standard & Poor's REIT
Index.
Strategy: The Fund will attempt to meet its objective primarily through the
active selection of REIT securities across different types and regions. The
selection of investments will be made based on the fundamental research that the
Manager conducts through its strategy and research analyst team.
- --------------------------------------------------------------------------------
GROWTH OF A $10,000 INVESTMENT
<TABLE>
<CAPTION>
Dates Tuckerman Active REIT Fund Wilshire REIT Index ** S&P(R)REIT Index ***
<S> <C> <C> <C>
Inception* $10,000 $10,000 $10,000
1998 $8,201 $8,357 $8,228
1999 $8,700 $8,831 $8,447
</TABLE>
================================================================================
Performance Review
For the fiscal year ended August 31, 1999, the SSgA Tuckerman Real Estate Equity
Fund had a total return of 6.09%, outperforming the Wilshire REIT Index return
of 5.63% by 46 basis points. The Fund's performance is net of operating
expenses, whereas Index results do not include expenses of any kind. The Fund
changed its primary benchmark from the S&P(R) REIT Index to the Wilshire REIT
Index as of April 30, 1999. This change was made in order to make the Fund
competitive and comparable to other REIT products in the market. The Managers'
research indicated that the Wilshire REIT Index is the most commonly recognized
REIT benchmark. In order to align the portfolio with its new benchmark, the Fund
sold two Health Care positions, and reinvested the proceeds into existing
holdings.
Market and Portfolio Highlights
The one-year return of 6.09% came with a great degree of volatility, as
evidenced by the Fund's standard deviation of 4.04% during the period. The
strongest month for performance was April 1999, when the Fund returned 10.67%.
This strong performance effectively reversed the negative
- --------------------------------------------------------------------------------
SSgA Tuckerman Active REIT Fund
- --------------------------------------------------------------------------------
Period Ended Growth of Total
08/31/99 $10,000 Return
- -------------- ------------ -------
1 Year $ 10,609 6.09%
Inception $ 8,700 (9.92)%+
- --------------------------------------------------------------------------------
Wilshire REIT Index
- --------------------------------------------------------------------------------
Period Ended Growth of Total
08/31/99 $10,000 Return
- -------------- ------------ -------
1 Year $ 10,563 5.63%
Inception $ 8,831 (8.93)%+
- --------------------------------------------------------------------------------
Standard & Poor's(R) REIT Index
- --------------------------------------------------------------------------------
Period Ended Growth of Total
08/31/99 $10,000 Return
- -------------- ------------ -------
1 Year $ 10,263 2.63%
Inception $ 8,447 (11.92)%+
See related Notes on following page.
6 Annual Report
<PAGE>
SSgA Tuckerman Active REIT Fund
- --------------------------------------------------------------------------------
Portfolio Management Discussion and Analysis
- --------------------------------------------------------------------------------
returns of the previous four months. The REIT group seemed to be experiencing a
change in investor sentiment to the positive. Factors that helped fuel the rally
included a $300 million REIT index buy order from a large institution, two
announced management buyout/leveraged buyouts and, perhaps most importantly, the
news that famed investor Warren Buffet had made an investment in two REITs,
Tanger Factory Outlets and Town and Country Trust. In May the rally continued
with the market gaining 2.66%, however, this was followed by three consecutive
months of negative returns.
While the share price performance of REITs has been volatile, real estate
fundamentals have remained very much intact. The US real estate markets in this
period can best be described as "in equilibrium". At the beginning of 1999, the
Fund estimated that REITs would produce earnings growth of 9-11%, slightly below
the growth of roughly 13% they posted in 1998. The companies continue to pay out
attractive dividends that are very well protected by cash flow. In addition, the
growth rate on REIT dividends is accelerating. Currently, the group is yielding
approximately 8%, which represents a 200 basis point spread over the 30-year
treasury, which is quite high by historical standards.
The Fund estimates that the average REIT is trading at a discount-to-liquidation
value of 15-20%. A year ago, REITs were trading at similar discounts, however,
these two periods differ. After 12 months of weak performance, REIT management
teams are becoming more and more frustrated with their share prices. Twelve
months ago, financing for risky projects was difficult to obtain due to the
global financial market meltdown, however, since that time, financing has become
easier to obtain and real estate opportunity funds are awash in capital. The
Manager expects an increasing volume of leveraged buyout and/or privatization of
REITs if the markets do not afford share prices close to their liquidation
value.
During fiscal year 1999, the Fund moved from an underweight position in the
hotel segment to an overweight position. As of August 31, 1999, the Fund held a
12.3% exposure in hotel REITs versus the benchmark weighting of 6.6%. The Fund
believed the drubbing that stocks in this segment took in 1998 was overdone, and
that the shares had priced in a very negative economic environment which Fund
management did not believe would materialize. In the first calendar quarter of
1999 the bet appeared to be paying off, as the hotel segment posted very strong
total returns. Beginning in June however, REITs began to trade down based on
concern over the effect of tightening fiscal policy on the economy, and the
resulting level of demand for hotel rooms. Since June the hotel segment has
given back all of the first quarter gains and is now in negative territory
through the end of August.
The Fund maintained its overweight position in the office segment throughout the
fiscal year, which helped the relative performance for the period. At August 31,
1999, the Fund held 28.3% in office REITs versus the benchmark weight of 24.3%.
In addition, the office segment holdings, those focused on the downtown markets
such as Boston Properties, Spieker Properties, and Equity Office Properties,
were the strongest performers in the group. The Fund also benefited greatly from
its underweight to the retail real estate segment. As of August 31, 1999, the
Fund held 18.5% in the retail segment versus the Wilshire REIT Index weight of
25.7%. This segment performed very poorly during the period due to investor
concerns relative to the effect e-commerce would have on traditional real estate
based retailers.
- --------------------------------------------------------
Top Ten Equity Holdings
(as a percent of Total Investments) August 31, 1999
- --------------------------------------------------------
Equity Office Properties Trust 5.7%
Apartment Investment &
Management Co. Class A 5.0
Avalonbay Communities, Inc. 4.9
SL Green Realty Corp. 4.7
Archstone Communities Trust 4.7
Simon Property Group, Inc. 4.4
Spieker Properties, Inc. 4.4
Alexandria Real Estate Equities, Inc. 4.1
Equity Residential Properties Trust 4.0
MeriStar Hospitality Corp. 3.9
- --------------------------------------------------------
---------------------
Notes: The following notes relate to the Growth of $10,000 graph and table on
the preceding page.
* The Fund commenced operations on May 1, 1998. Index comparison also began
May 1, 1998.
** The Wilshire REIT Index is a market capitalization-weighted index
comprised of publicly traded Real Estate Investment Trusts (REITs). No
special purpose or healthcare REITs are included. The index is rebalanced
monthly and reconstituted quarterly.
*** The Standard & Poor's(R) REIT Composite Index is capitalization-weighted
index of 100 stocks designed to measure the performance of Real Estate
Investment Trusts, commonly know as REITs. The Index was developed with a
base value of 100 as of December 31, 1996.
+ Annualized.
Performance is historical and assumes reinvestment of all dividends and capital
gains. Investment return and principal value will fluctuate so that an
investor's shares, when redeemed, may be worth more or less than when purchased.
Past performance is not indicative of future results.
Annual Report 7
<PAGE>
Report of Independent Accountants
To the Shareholders and Board of Trustees
of the SSgA Funds:
In our opinion, the accompanying statement of assets and liabilities and
statement of net assets, and the related statements of operations and of changes
in net assets and the financial highlights present fairly, in all material
respects, the financial position of SSgA Tuckerman Active REIT Fund (formerly
SSgA Real Estate Equity Fund)(the "Fund") at August 31, 1999, the results of its
operations for the fiscal year then ended and the changes in its net assets and
the financial highlights for the fiscal year then ended and for the period May
1, 1998 (commencement of operations) to August 31, 1998, in conformity with
generally accepted accounting principles. These financial statements and
financial highlights (hereafter referred to as "financial statements") are the
responsibility of the Fund's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with generally accepted
auditing standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at August 31, 1999 by
correspondence with the custodian and brokers, provide a reasonable basis for
the opinion expressed above.
Boston, Massachusetts
October 11, 1999
/s/ PricewaterhouseCoopers LLP
8 Annual Report
<PAGE>
SSgA
Tuckerman Active REIT Fund
Statement of Net Assets
August 31, 1999
Market
Number Value
of (000)
Shares $
------ ------
Common Stocks (a) - 99.5%
Apartment - 24.5%
Apartment Investment & Management Co. Class A 56,600 2,321
Archstone Communities Trust 100,700 2,152
Avalonbay Communities, Inc. 64,600 2,277
Equity Residential Properties Trust 41,700 1,835
Essex Property Trust, Inc. 16,200 569
Smith (Charles E.) Residential Realty, Inc. 25,600 878
Sun Communities, Inc. 31,400 1,123
-------
11,155
-------
Hotels/Leisure - 8.5%
FelCor Lodging Trust, Inc. 62,200 1,116
Host Marriott Corp. 118,700 1,098
Sunstone Hotel Investors, Inc. 184,300 1,659
-------
3,873
-------
Leasing - 10.1%
Captec Net Lease Realty, Inc. 87,400 1,000
Glenborough Realty Trust, Inc. 102,800 1,780
MeriStar Hospitality Corp. 106,900 1,804
-------
4,584
-------
Office/Industrial - 37.9%
Alexandria Real Estate Equities, Inc. 64,200 1,882
Boston Properties, Inc. 49,200 1,639
Brandywine Realty Trust 64,200 1,152
CenterPoint Properties Corp. 5,300 178
Cornerstone Properties, Inc. 18,000 287
Corporate Office Properties Trust 73,000 602
Cousins Properties, Inc. 21,300 764
Crescent Real Estate Equities, Inc. 10,600 220
Duke Realty Investments, Inc. 79,798 1,790
Equity Office Properties Trust 102,200 2,612
First Industrial Realty Trust, Inc. 28,600 733
Mack-Cali Realty Corp. 14,700 417
ProLogis Trust 37,100 728
SL Green Realty Corp. 105,200 2,189
Spieker Properties, Inc. 52,900 2,024
-------
17,217
-------
Outlet Centers - 3.2%
Chelsea GCA Realty, Inc. 43,300 1,472
-------
Regional Malls - 7.0%
CBL & Associates Properties, Inc. 46,400 1,154
Simon Property Group, Inc. 80,300 2,048
-------
3,202
-------
Self Storage - 2.0%
Storage USA, Inc. 31,600 914
-------
Shopping Center - 6.3%
Equity One, Inc. 30,800 331
Kimco Realty Corp. 42,800 1,594
Realty Income Corp. 17,700 420
Weingarten Realty Investors 12,700 504
-------
2,849
-------
Total Common Stocks
(cost $45,819) 45,266
-------
Annual Report 9
<PAGE>
SSgA
Tuckerman Active REIT Fund
Statement of Net Assets, continued
August 31, 1999
Principal Market
Amount Value
(000) (000)
$ $
--------- ------
Short-Term Investments - 2.0%
AIM Short Term Investment Prime Portfolio (b) 926 926
Federated Investors Prime Cash Obligations Fund (b) 1 1
-------
Total Short-Term Investments
(cost $927) 927
-------
Total Investments - 101.5%
(identified cost $46,746) 46,193
Other Assets and Liabilities,
Net - (1.5%) (665)
-------
Net Assets - 100.0% 45,528
=======
(a) All common stocks held are Real Estate Investment Trusts (REITs).
(b) At cost, which approximates market.
See the accompanying notes which are an integral part of the financial
statements.
10 Annual Report
<PAGE>
SSgA
Tuckerman Active REIT Fund
Statement of Assets and Liabilities
Amounts in thousands (except per share amount) August 31, 1999
<TABLE>
<S> <C> <C>
Assets
Investments at market (identified cost $46,746) ........................................... $ 46,193
Receivables:
Dividends .............................................................................. 15
Fund shares sold ....................................................................... 45
Deferred organization expenses ............................................................ 1
Prepaid expenses .......................................................................... 11
Short-term investments held as collateral for securities loaned, at market ................ 6,280
----------
Total Assets ........................................................................ 52,545
Liabilities
Payables:
Investments purchased .................................................... $ 486
Fund shares redeemed ..................................................... 176
Accrued fees to affiliates ............................................... 49
Other accrued expenses ................................................... 26
Payable upon return of securities loaned, at market ......................... 6,280
----------
Total Liabilities ................................................................... 7,017
----------
Net Assets ................................................................................ $ 45,528
==========
Net Assets Consist of:
Undistributed net investment income ....................................................... $ 149
Accumulated net realized gain (loss) ...................................................... (3,618)
Unrealized appreciation (depreciation) on investments ..................................... (553)
Shares of beneficial interest ............................................................. 6
Additional paid-in capital ................................................................ 49,544
----------
Net Assets ................................................................................ $ 45,528
==========
Net Asset Value, offering and redemption price per share:
($45,528,417 divided by 5,634,451 shares of $.001 par value
shares of beneficial interest outstanding) .......................................... $ 8.08
==========
</TABLE>
See the accompanying notes which are an integral part of the financial
statements.
Annual Report 11
<PAGE>
SSgA
Tuckerman Active REIT Fund
Statement of Operations
Amounts in thousands For the Fiscal Year Ended August 31, 1999
<TABLE>
<S> <C> <C>
Investment Income
Dividends ...................................................................... $ 2,595
Interest ....................................................................... 13
---------
Total Investment Income ..................................................... 2,608
Expenses
Advisory fees .................................................... $ 234
Administrative fees .............................................. 11
Custodian fees ................................................... 22
Distribution fees ................................................ 17
Transfer agent fees .............................................. 26
Professional fees ................................................ 14
Registration fees ................................................ 37
Shareholder servicing fees ....................................... 11
Trustees' fees ................................................... 1
Miscellaneous .................................................... 20
---------
Expenses before reductions ....................................... 393
Expense reductions ............................................... (33)
---------
Expenses, net ............................................................... 360
---------
Net investment income ............................................................. 2,248
---------
Net Realized and Unrealized Gain (Loss)
Net realized gain (loss) on investments ........................................... (3,566)
Net change in unrealized appreciation (depreciation) on investments ............... 3,593
---------
Net realized and unrealized gain (loss) ........................................... 27
---------
Net increase (decrease) in net assets resulting from operations ................... $ 2,275
=========
</TABLE>
See the accompanying notes which are an integral part of the financial
statements.
12 Annual Report
<PAGE>
SSgA
Tuckerman Active REIT Fund
Statement of Changes in Net Assets
Amounts in thousands For the Fiscal Years Ended August 31,
<TABLE>
<CAPTION>
1999 1998*
---------- ----------
<S> <C> <C>
Increase (Decrease) in Net Assets
Operations
Net investment income ................................................ $ 2,248 $ 340
Net realized gain (loss) ............................................. (3,566) (52)
Net change in unrealized appreciation (depreciation) ................. 3,593 (4,146)
---------- ----------
Net increase (decrease) in net assets resulting from operations ... 2,275 (3,858)
---------- ----------
Distributions
From net investment income ........................................... (2,374) (74)
---------- ----------
Share Transactions
Net increase (decrease) in net assets from share transactions ........ 27,169 22,390
---------- ----------
Total Net Increase (Decrease) in Net Assets ............................. 27,070 18,458
Net Assets
Beginning of period .................................................. 18,458 --
---------- ----------
End of period (including undistributed net investment income of
$149 and $266, respectively) ...................................... $ 45,528 $ 18,458
========== ==========
</TABLE>
* For the period May 1, 1998 (commencement of operations) to August 31, 1998.
See the accompanying notes which are an integral part of the financial
statements.
Annual Report 13
<PAGE>
SSgA
Tuckerman Active REIT Fund
Financial Highlights
The following table includes selected data for a share outstanding throughout
each period and other performance information derived from the financial
statements.
Fiscal Years Ended
August 31,
-------------------------
1999 1998*
---------- ----------
Net Asset Value, Beginning of Period ............. $ 8.17 $ 10.00
---------- ----------
Income From Operations
Net investment income (a) ..................... .50 .15
Net realized and unrealized gain (loss) ....... (.01) (1.94)
---------- ----------
Total Income From Operations ............... .49 (1.79)
---------- ----------
Distributions
From net investment income .................... (.58) (.04)
---------- ----------
Net Asset Value, End of Period ................... $ 8.08 $ 8.17
========== ==========
Total Return (%)(b) .............................. 6.09 (17.99)
Ratios/Supplemental Data:
Net Assets, end of period ($ in thousands) .... 45,528 18,458
Ratios to average net assets (%)(c):
Operating expenses, net (d) ................ 1.00 1.00
Operating expenses, gross (d) .............. 1.09 1.38
Net investment income ...................... 6.25 5.21
Portfolio turnover rate (%)(c) ................ 60.13 17.36
* For the period May 1, 1998 (commencement of operations) to August 31,
1998.
(a) For the period subsequent to August 31, 1998, average month-end shares
outstanding were used for this calculation.
(b) Periods less than one year are not annualized.
(c) The ratios for the period ended August 31, 1998 are annualized.
(d) See Note 4 for current period amounts.
14 Annual Report
<PAGE>
SSgA
Tuckerman Active REIT Fund
Notes to Financial Statements
August 31, 1999
1. Organization
The SSgA Funds (the "Investment Company") is a series mutual fund,
currently comprised of 23 investment portfolios which are in operation as
of August 31, 1999. These financial statements report on one portfolio,
the SSgA Tuckerman Active REIT Fund (formerly SSgA Real Estate Equity
Fund)(the "Fund"). The Investment Company is a registered and diversified
open-end investment company, as defined in the Investment Company Act of
1940, as amended (the "1940 Act"), that was organized as a Massachusetts
business trust on October 3, 1987 and operates under a First Amended and
Restated Master Trust Agreement, dated October 13, 1993, as amended (the
"Agreement"). The Investment Company's Agreement permits the Board of
Trustees to issue an unlimited number of full and fractional shares of
beneficial interest at a $.001 par value.
2. Significant Accounting Policies
The Fund's financial statements are prepared in accordance with generally
accepted accounting principles which require the use of management
estimates. The following is a summary of the significant accounting
policies consistently followed by the Fund in the preparation of its
financial statements.
Security valuation: United States equity securities listed and traded
principally on any national securities exchange are valued on the basis of
the last sale price or, lacking any sale, at the closing bid price, on the
primary exchange on which the security is traded. United States
over-the-counter equities are valued on the basis of the closing bid
price.
Money market instruments maturing within 60 days of the valuation date are
valued at amortized cost, a method by which each portfolio instrument is
initially valued at cost, and thereafter a constant accretion/amortization
to maturity of any discount or premium is assumed, unless the Board of
Trustees determines that amortized cost does not represent fair value.
The Fund may value securities for which market quotations are not readily
available at "fair value," as determined in good faith pursuant to
procedures established by the Board of Trustees.
Securities transactions: Securities transactions are recorded on a trade
date basis. Realized gains and losses from securities transactions are
recorded on the basis of identified cost.
Investment income: Dividend income is recorded on the ex-dividend date and
interest income is recorded on the accrual basis.
Amortization and accretion: All zero-coupon bond discounts and original
issue discounts are accreted for both tax and financial reporting
purposes. All short- and long-term market premiums/discounts are
amortized/accreted for both tax and financial reporting purposes.
Federal income taxes: Since the Investment Company is a Massachusetts
business trust, each fund is a separate corporate taxpayer and determines
its net investment income and capital gains (or losses) and the amounts to
be distributed to each fund's shareholders without regard to the income
and capital gains (or losses) of the other funds.
Annual Report 15
<PAGE>
SSgA
Tuckerman Active REIT Fund
Notes to Financial Statements, continued
August 31, 1999
It is the Fund's intention to qualify as a regulated investment company,
as defined by the Internal Revenue Code of 1986, as amended. This requires
the Fund to distribute all of its taxable income. Therefore, the Fund paid
no federal income taxes and no federal income tax provision was required.
At August 31, 1999, the Fund had a net tax basis capital loss carryover of
$471,979 which may be applied against any realized net taxable gains in
each succeeding year or until its expiration date of August 31, 2007. As
permitted by tax regulations, the Fund intends to defer a net realized
capital loss of $3,132,796 incurred from November 1, 1998 to August 31,
1999, and treat it as arising in fiscal year 2000.
The Fund's aggregate cost of investments and the composition of unrealized
appreciation and depreciation of investment securities for federal income
tax purposes as of August 31, 1999 are as follows:
Net Unrealized
Federal Tax Unrealized Unrealized Appreciation
Cost Appreciation (Depreciation) (Depreciation)
----------- ------------ ------------- -------------
$46,759,550 $ 1,871,450 $ (2,438,095) $ (566,645)
Dividends and distributions to shareholders: Income dividends and capital
gain distributions, if any, are recorded on the ex-dividend date.
Dividends are generally declared and paid quarterly. Capital gain
distributions are generally declared and paid annually. An additional
distribution may be paid by the Fund to avoid imposition of federal income
tax on any remaining undistributed net investment income and capital
gains.
The timing and characterization of certain income and capital gain
distributions are determined in accordance with federal tax regulations
which may differ from generally accepted accounting principles ("GAAP").
As a result, net investment income and net realized gain (or loss) on
investment transactions for a reporting period may differ significantly
from distributions during such period. The differences between tax
regulations and GAAP relate primarily to certain securities sold at a
loss. Accordingly, the Fund may periodically make reclassifications among
certain of its capital accounts without impacting its net asset value.
Expenses: Most expenses can be directly attributed to the Fund. Expenses
which cannot be directly attributed are allocated among all funds based
principally on their relative net assets.
3. Securities Transactions
Investment transactions: For the year ended August 31, 1999, purchases and
sales of investment securities, excluding short-term investments,
aggregated to $48,521,702 and $21,194,877, respectively.
Securities Lending: Effective December 17, 1998, the Investment Company
started its securities lending program. The program allows each Fund to
loan securities with a value up to 33 1/3% of its total assets to certain
brokers. The Fund receives cash (U.S. currency), U.S. Government or U.S.
Government agency obligations as collateral against the loaned securities.
To the extent that a loan is secured by cash collateral, such collateral
shall be invested by State Street Bank and Trust Company in short-term
instruments, money market mutual funds, and such other short-term
investments, provided the investments meet certain quality and
diversification requirements. Under the securities lending arrangement,
the collateral received is recorded on the Fund's statement of assets and
liabilities along with the related obligation to return the collateral. In
those situations where the Company has relinquished control of securities
transferred, it derecognizes the securities and records a receivable from
the counterparty.
16 Annual Report
<PAGE>
SSgA
Tuckerman Active REIT Fund
Notes to Financial Statements, continued
August 31, 1999
Income generated from the investment of cash collateral, less negotiated
rebate fees paid to participating brokers and transaction costs, is
divided between the Fund and State Street Bank and Trust Company and is
recorded as interest income for the Fund. To the extent that a loan is
secured by non-cash collateral, brokers pay the Fund negotiated lenders'
fees, which are divided between the Fund and State Street Bank and Trust
Company and are recorded as interest income for the Fund. All collateral
received will be in an amount at least equal to 102% (for loans of U.S.
securities) or 105% (for non-U.S. securities) of the market value of the
loaned securities at the inception of each loan. Should the borrower of
the securities fail financially, there is a risk of delay in recovery of
the securities or loss of rights in the collateral. Consequently, loans
are made only to borrowers which are deemed to be of good financial
standing. As of August 31, 1999, the value of outstanding securities on
loan and the value of collateral amounted to $5,994,007 and $6,279,920,
respectively. The Fund recorded securities lending income of $8,805 during
the year.
4. Related Parties
Adviser: The Investment Company has an investment advisory agreement with
State Street Bank and Trust Company under which the Adviser directs the
investments of the Fund in accordance with its investment objectives,
policies, and limitations. For these services, the Fund pays a fee to the
Adviser calculated daily and paid monthly, at an annual rate of .65% of
its average daily net assets. The Adviser voluntarily agreed to waive up
to the full amount of its Advisery fee to the extent that total expenses
exceed 1.00% of average daily net assets on an annual basis. The
Investment Company also has contracts with the Adviser to provide custody,
shareholder servicing and transfer agent services to the Fund. These
amounts are presented in the accompanying Statement of Operations.
In addition, the Fund has entered into arrangements with its Adviser
whereby credits realized as a result of uninvested cash balances were used
to reduce a portion of the Fund's expenses. During the period, the Fund's
custodian fees were reduced by $689 under these arrangements.
Administrator: The Investment Company has an administration agreement with
Frank Russell Investment Management Company (the "Administrator"), a
wholly owned subsidiary of The Northwestern Mutual Life Insurance Company,
under which the Administrator supervises all non-portfolio investment
aspects of the Investment Company's operations and provides adequate
office space and all necessary office equipment and services, including
telephone service, utilities, stationery supplies, and similar items. The
Investment Company pays the Administrator the following fees for services
supplied by the Administrator pursuant to the Administration Agreement:
(i) an annual fee, payable monthly on a pro rata basis, based on the
following percentages of the combined average daily net assets of all
domestic funds: $0 up to and including $500 million - .06%; over $500
million to and including $1 billion - .05%; over $1 billion - .03%, and
(ii) less an amount equal to the sum of certain distribution-related
expenses incurred by the Investment Company's Distributor on behalf of the
Fund (up to a maximum of 5% for the period May 1, 1998 to December 31,
1998, and 0% thereafter, of the asset-based fee determined in (i)). In
addition, the Fund reimburses the Administrator for out-of-pocket expenses
and start-up costs for new funds.
Annual Report 17
<PAGE>
SSgA
Tuckerman Active REIT Fund
Notes to Financial Statements, continued
August 31, 1999
Distributor and Shareholder Servicing: The Investment Company has a
Distribution Agreement with Russell Fund Distributors (the "Distributor")
which is a wholly-owned subsidiary of the Administrator to promote and
offer shares of the Investment Company. The Distributor may have entered
into sub-distribution agreements with other non-related parties. The
amounts paid to the Distributor are included in the accompanying Statement
of Operations.
The Investment Company has a Distribution Plan pursuant to Rule 12b-1 (the
"Plan") under the 1940 Act. Under this Plan, the Investment Company is
authorized to make payments to the Distributor, or any Shareholder
Servicing Agent, as defined in the Plan, for providing distribution and
marketing services, for furnishing assistance to investors on an ongoing
basis, and for the reimbursement of direct out-of-pocket expenses charged
by the Distributor in connection with the distribution and marketing of
shares of the Investment Company and the servicing of investor accounts.
The Fund has service agreements with the Adviser, State Street Brokerage
Services, Inc. ("SSBSI"), a wholly-owned subsidiary of the Adviser, the
Adviser's Retirement Investment Services Division ("RIS"), the Adviser's
Metropolitan Division of Commercial Banking ("Commercial Banking") and
State Street Solutions ("Solutions")(collectively the "Agents"), as well
as several unaffiliated service providers. For these services, the Fund
pays .025%, .175%, .175%, .175% and .175% to the Adviser, SSBSI, RIS,
Commercial Banking, and Solutions, respectively, based upon the average
daily value of all Fund shares held by or for customers of these Agents.
For the year August 31, 1999, the Fund was charged shareholder servicing
expenses of $8,993, $1,058, and $1,013 by the Adviser, SSBSI, and
Commercial Banking, respectively. The Fund did not incur any expenses from
RIS and Solutions during this period.
The combined distribution and shareholder servicing payments shall not
exceed .25% of the average daily value of net assets on an annual basis.
The shareholder servicing payments shall not exceed .20% of the average
daily value of net assets on an annual basis. Any payments that exceed the
maximum amount of allowable reimbursement may be carried forward for two
years following the year in which the expenditure was incurred so long as
the plan is in effect. The Fund's responsibility for any such expenses
carried forward shall terminate at the end of two years following the year
in which the expenditure was incurred. The Trustees or a majority of the
Fund's shareholders have the right, however, to terminate the Distribution
Plan and all payments thereunder at any time. The Fund will not be
obligated to reimburse the Distributor for carryover expenses subsequent
to the Distribution Plan's termination or noncontinuance. There were no
carryover expenses as of August 31, 1999.
Affiliated Brokerage: The Fund placed a portion of its portfolio
transactions with SSBSI, an affiliated broker dealer of the Fund's
Adviser. The commissions paid to SSBSI were $7,292 for the year ended
August 31, 1999.
Board of Trustees: Through May 31, 1999, the Investment Company paid each
Trustee not affiliated with the Investment Company a retainer of $48,000
annually, $1,500 for each board meeting attended, an additional $1,500 for
attending the annual audit committee meeting, and reimbursement for
out-of-pocket expenses. As of June 1, 1999, each Trustee receives $2,500
for each board meeting attended, an additional $2,500 for attending the
annual audit committee meeting and $2,500 for the valuation committee fee
in addition to the $48,000 annual retainer. These expenses are allocated
among all of the Funds based upon their relative net assets.
18 Annual Report
<PAGE>
SSgA
Tuckerman Active REIT Fund
Notes to Financial Statements, continued
August 31, 1999
Accrued fees payable to affiliates and trustees as of August 31, 1999 were
as follows:
Advisory fees $ 40,966
Administration fees 1,208
Custodian fees 1,421
Distribution fees 216
Shareholder servicing fees 1,183
Transfer agent fees 3,765
Trustees' fees 75
---------
$ 48,834
=========
Beneficial Interest: As of August 31, 1999, two shareholders (who are also
affiliates of the Investment Company) were record owners of approximately
29%, and 11%, respectively, of the total outstanding shares of the Fund.
5. Fund Share Transactions (amounts in thousands)
<TABLE>
<CAPTION>
For the Period May 1, 1998
Fiscal Year Ended (Commencement of Operations)
August 31, 1999 to August 31, 1998
------------------------ ------------------------
Shares Dollars Shares Dollars
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Proceeds from shares sold ...................... 3,647 $ 29,401 2,260 $ 22,403
Proceeds from reinvestment of distributions .... 139 1,135 4 34
Payments for shares redeemed ................... (411) (3,367) (5) (47)
---------- ---------- ---------- ----------
Total net increase (decrease) .................. 3,375 $ 27,169 2,259 $ 22,390
========== ========== ========== ==========
</TABLE>
6. Line of Credit
The Fund and several affiliated Funds (the "Participants") share in a $50
million revolving credit facility for temporary or emergency purposes,
including the meeting of redemption requests that otherwise might require
the untimely disposition of securities. The Participants are charged an
annual commitment fee of .09% (.065% prior to July 15, 1999) on the
average daily unused amount of the aggregate commitment, which is
allocated among each of the Participants. Interest, at the Federal Fund
Rate plus .50% annually, is calculated based on the market rates at the
time of the borrowing. The Fund may borrow up to a maximum of 33 1/3
percent of the value of it's net assets under the agreement. The Fund did
not have any drawdowns during the year.
7. Dividends
On September 1, 1999, the Board of Trustees declared a dividend of $.0249
from net investment income, payable on September 7, 1999 to shareholders
of record on September 2, 1999.
Annual Report 19
<PAGE>
SSgA
Tuckerman Active REIT Fund
Matter Submitted to a Vote of Shareholders
August 31, 1999
THE FOLLOWING MATTER WAS BROUGHT TO THE SHAREHOLDERS AS A PROXY VOTE.
The results of the vote accompany the description of the matter.
1. To approve a proposal to reclassify the Fund as a non-diversified
investment company and to eliminate a fundamental Fund restriction
regarding diversification.
VOTE:
Abstain
For Against Non-Vote
------------- ------- -----------
Tuckerman Active REIT Fund 5,009,549.172 -- 554,659.072
20 Annual Report
<PAGE>
SSgA Tuckerman Active REIT Fund
One International Place, 27th Floor
Boston, Massachusetts 02110
(800) 997-7327
- --------------------------------------------------------------------------------
Trustees
Lynn L. Anderson, Chairman
William L. Marshall
Steven J. Mastrovich
Patrick J. Riley
Richard D. Shirk
Bruce D. Taber
Henry W. Todd
Officers
Lynn L. Anderson, President, Treasurer and CEO
Mark E. Swanson, Assistant Secretary, Assistant
Treasurer and Principal Accounting Officer
J. David Griswold, Vice President and Secretary
Deedra S. Walkey, Assistant Secretary
Rick J. Chase, Assistant Secretary
Carla L. Anderson, Assistant Secretary
Investment Adviser
State Street Bank and Trust Company
225 Franklin Street
Boston, Massachusetts 02110
Custodian, Transfer Agent and
Office of Shareholder Inquiries
State Street Bank and Trust Company
1776 Heritage Drive
North Quincy, Massachusetts 02171
(800) 647-7327
Distributor
Russell Fund Distributors, Inc.
One International Place, 27th Floor
Boston, Massachusetts 02110
(800) 997-7327
Administrator
Frank Russell Investment Management Company
909 A Street
Tacoma, Washington 98402
Legal Counsel
Goodwin, Procter & Hoar LLP
Exchange Place
Boston, Massachusetts 02109
Independent Accountants
PricewaterhouseCoopers LLP
160 Federal Street
Boston, Massachusetts 02110
Annual Report 21
<PAGE>
SSgA(R) Funds
International Growth Opportunities Fund
Annual Report
August 31, 1999
Table of Contents
Page
Chairman's Letter............................................. 4
Portfolio Management Discussion and Analysis.................. 6
Report of Independent Accountants............................. 8
Financial Statements.......................................... 9
Financial Highlights.......................................... 15
Notes to Financial Statements................................. 16
Tax Information............................................... 22
Fund Management and Service Providers......................... 23
"SSgA(R)" is a registered trademark of State Street Corporation and is licensed
for use by the SSgA Funds.
This report is prepared from the books and records of the Fund and it is
submitted for the general information of shareholders. This information is for
distribution to prospective investors only when preceded or accompanied by a
SSgA Funds Prospectus containing more complete information concerning the
investment objective and operations of the Fund, charges and expenses. The
Prospectus should be read carefully before an investment is made.
Performance is historical and assumes reinvestment of all dividends and capital
gains. Investment return and principal value will fluctuate so that an
investor's shares, when redeemed, may be worth more or less than when purchased.
Past performance is not indicative of future results. International markets
entail different risks than those typically associated with domestic markets,
including currency fluctuations, political and economic instability, accounting
changes and foreign taxation. Securities may be less liquid and more volatile.
Please see the Prospectus for further details. Russell Fund Distributors, Inc.,
is the distributor of the SSgA Funds.
<PAGE>
SSgA International Growth Opportunities Fund
- --------------------------------------------------------------------------------
Letter From the Chairman of State Street Global Advisors
- --------------------------------------------------------------------------------
Dear Shareholders,
It is my pleasure to provide you with the SSgA Funds annual report for the
fiscal year ended August 31, 1999. The SSgA Fund family has grown to include
twenty-three portfolios covering a broad range of investment strategies. The
enclosed information provides an overview of the investment process for the SSgA
International Growth Opportunities Fund. This overview contains market updates,
performance, and financial information for the Fund. I hope you will find this
information a useful reference as you review your investment strategy.
During the past fiscal year, the SSgA Fund family has opened two new Funds. The
names and investment objectives for these funds are as follows:
The SSgA Aggressive Equity Fund seeks to maximize total return through investing
in US equity securities that are undervalued relative to their growth potential
as measured by SSgA's proprietary models.
The SSgA IAM Shares Fund seeks to maximize total return by investing primarily
in equity securities of companies that have entered into collective bargaining
agreements with the International Association of Machinists and Aerospace
Workers or affiliated labor unions.
Additionally, three SSgA Funds achieved a five-year track record during the 1999
fiscal year. These funds include the two institutional money market funds, SSgA
US Treasury and SSgA Prime Money Market Funds and the SSgA Emerging Markets
Fund. We are proud of our long-term record and look forward to having additional
funds complete their five-year anniversary.
In today's complex global marketplace, we are continually researching new
products and ideas to introduce to our fund family. Here at SSgA, we are
committed to providing a wide range of competitive investment vehicles to
fulfill your investment needs.
I would like to thank you for choosing the SSgA Funds.
Sincerely,
/s/ Nicholas A. Lopardo
Nicholas A. Lopardo
State Street Global Advisors
Chairman and Chief Executive Officer
4 Annual Report
<PAGE>
SSgA International Growth Opportunities Fund
- --------------------------------------------------------------------------------
Management of the Funds
- --------------------------------------------------------------------------------
[PHOTO]
Nicholas A. Lopardo
Chairman and Chief Executive Officer
A Team Approach to Investment Management
Our investment strategies are the product of the combined experience of our
professional staff. Portfolio Managers work together to develop and enhance the
techniques that drive our investment processes. As a result, the portfolios we
manage benefit from the knowledge of the entire team.
Mr. Jeffrey Davis, Principal, has been the portfolio manager primarily
responsible for investment decisions regarding the SSgA International Growth
Opportunities Fund since its inception in April 1998. Mr. Davis has been with
State Street since November 1992, primarily involved in international and
emerging markets investing, and worked closely with the International Finance
Committee in launching emerging markets index funds. In early 1997, Mr. Davis
left State Street to work for Schooner Asset Management, managing emerging
market private equity and debt funds, and subsequently returned to State Street
in December 1997 as chief investment strategist and manager of international
global opportunities funds. There are three other portfolio managers working
with Mr. Davis.
Annual Report 5
<PAGE>
SSgA International Growth Opportunities Fund
- --------------------------------------------------------------------------------
Portfolio Management Discussion and Analysis
- --------------------------------------------------------------------------------
Objective: Provide long-term capital growth by investing primarily in securities
of foreign issuers.
Invests in: Securities of foreign issuers.
Strategy: The Fund will attempt to meet its objective through the active
selection of equity securities through the fundamental analysis of companies and
investment themes. Quantitative techniques and the use of securities other than
common stock will be used primarily to control risk and to efficiently capture
opportunities of investment themes. Investments will be made in, but not limited
to, countries included in the Morgan Stanley Capital International Europe,
Australia, Far East ("MSCI EAFE") Index, and the Morgan Stanley Capital
International Emerging Markets Free ("MSCI EMF") Index. The Fund's comparative
benchmark, the Morgan Stanley Capital International All Country World Ex-US
Index ("MSCI All Country World Ex-US") is comprised of the membership of the
MSCI EAFE and the MSCI EMF Indices.
- --------------------------------------------------------------------------------
GROWTH OF A $10,000 INVESTMENT
<TABLE>
<CAPTION>
Dates International Growth Opportunities Fund MSCI All Country World Ex-US **
<S> <C> <C>
Inception* $10,000 $10,000
1998 $8,420 $8,463
1999 $11,374 $11,054
</TABLE>
================================================================================
Performance Review
For the fiscal year ended August 31, 1999, the SSgA International Growth
Opportunities Fund gained 35.08%. This compares favorably with the MSCI All
Country World Ex-US Index, which was up 30.66% for the same period. The Fund's
performance is net of operating expenses, whereas Index results do not include
expenses of any kind. The Fund's performance benefited from selection within
core blue chip European companies and for maintaining its exposure in Asian
securities as financial markets recovered. Additionally, the Fund's emphasis on
companies connected with the development of telecommunications in the new
integrated Europe has proven volatile, but profitable. The Fund benefited from
exposure in Mannesmann, Telefonica, Vodaphone, Ericsson, British Telecom, and
Nokia.
- --------------------------------------------------------------------------------
SSgA International Growth Opportunities Fund
- --------------------------------------------------------------------------------
Period Ended Growth of Total
08/31/99 $10,000 Return
- ------------------- ------------ --------
1 Year $ 13,508 35.08%
Inception $ 11,374 10.13%+
- --------------------------------------------------------------------------------
MSCI All Country World Ex-US
- --------------------------------------------------------------------------------
Period Ended Growth of Total
08/31/99 $10,000 Return
- ------------------- ------------ --------
1 Year $ 13,066 30.66%
Inception $ 11,054 7.83%+
See related Notes on following page.
6 Annual Report
<PAGE>
SSgA International Growth Opportunities Fund
- --------------------------------------------------------------------------------
Portfolio Management Discussion and Analysis
- --------------------------------------------------------------------------------
Market and Portfolio Highlights
The major contributor to the Fund's outstanding performance was its exposure to
Asian securities. Issues such as Bank of Tokyo-Mitsubishi, Fuji Bank, Honda, and
Singapore Airlines provided the Fund with strong gains in the period. Over the
past twelve months, confidence has returned to many markets in which the Fund is
invested, and foreign as well as domestic capital began returning to financial
markets. While the strong competitive companies of Japan and the rest of Asia
were beneficiaries of this recovery, the financial services in particular saw
extraordinary returns. The enormous merger of Dai-Ichi Kangyo Bank, Industrial
Bank of Japan, and Fuji Bank in August 1999, culminated a period of dramatic
restructuring in Japan's banking industry. Additionally, a new surge in
Internet-related business activity began sweeping through Asia. This includes
early stage business restructuring to segregate data and voice technology, as
well as startups focused on expanding the Internet "backbone" architecture
throughout Asia. The Fund currently holds two issues related to this trend, NTT
Data Corp. and Internet Initiative of Japan.
European returns have been far less impressive, as many of the core European
economies experienced significant slowdown early in 1999. By August 1999,
however, economic statistics in the UK, France, and Germany were all
demonstrating evidence of a rebound.
While the new Euro currency was launched in January with little difficulty, the
subsequent deteriorating valuation of the Euro relative to the dollar was a
negative factor for the Fund. Fortunately, the Fund was well positioned in some
of the major leaders of the new European economic landscape, particularly in the
Telecommunications sector. Companies such as Mannesmann, Vodaphone, and
Telefonica have been particularly strong performers for the Fund. The Manager is
also seeing potential opportunities from Internet related businesses. This will
allow the Fund the opportunity to expand from its emphasis in the telecom (or
"connectivity") issues into more direct investing in companies which will be
greatly advantaged in multiple industries from the new technology.
- --------------------------------------------------------
Top Ten Equity Holdings
(as a percent of Total Investments) August 31, 1999
- --------------------------------------------------------
NTT Data Corp. 3.1%
Takeda Chemical Industries 3.0
Mannesmann AG - ADR 2.7
Ericsson (LM) Telephone Co. Class B - ADR 2.7
Smithkline Beecham PLC - ADR 2.7
Internet Initiative Japan, Inc. - ADR 2.7
Nokia Corp. - ADR 2.5
Telefonica de Espana SA - ADR 2.4
British Telecommunications PLC - ADR 2.4
Total Co. SA - ADR 2.4
- --------------------------------------------------------
----------------------
Notes: The following notes relate to the Growth of $10,000 graph and table on
the preceding page.
* The Fund commenced operations on May 1, 1998. Index comparison also began
May 1, 1998.
The Morgan Stanley Capital International Europe, Australia, Far East Index
is an index composed of an arithmetic, market value-weighted average of
the performance of over 1,100 securities listed on the stock exchanges of
the countries of Europe, Australia, and the Far East. The Index is
calculated on a total-return basis, which includes reinvestment of net
dividends after deduction of withholding taxes.
** The Morgan Stanley Capital International All Country World Ex-US Index is
a market capitalization-weighted index that tracks the daily price and
total return performance of international common or ordinary shares in
developed markets worldwide. The Index, which aims to capture 60% of the
total market capitalization at both the participating country and industry
level, includes securities domiciled in 22 development countries in
Asia/Pacific, Europe and North America.
The Morgan Stanley Capital International Emerging Markets Free Global
Index is a market capitalization-weighted index that tracks the daily
stock price and total return performance of unrestricted common stocks or
ordinary shares of emerging markets domiciled in 22 countries generally
open to foreign investment, in local currency and U.S. dollar terms. It
aims to capture 60% of the total market capitalization at both the
participating country and industry level.
+ Annualized.
Performance is historical and assumes reinvestment of all dividends and capital
gains. Investment return and principal value will fluctuate so that an
investor's shares, when redeemed, may be worth more or less than when purchased.
Past performance is not indicative of future results.
Annual Report 7
<PAGE>
Report of Independent Accountants
To the Shareholders and Board of Trustees
of the SSgA Funds:
In our opinion, the accompanying statement of assets and liabilities and
statement of net assets, and the related statements of operations and of changes
in net assets and the financial highlights present fairly, in all material
respects, the financial position of SSgA International Growth Opportunities Fund
(the "Fund") at August 31, 1999, the results of its operations for the fiscal
year then ended and the changes in its net assets and the financial highlights
for the fiscal year then ended and for the period May 1, 1998 (commencement of
operations) to August 31, 1998, in conformity with generally accepted accounting
principles. These financial statements and financial highlights (hereafter
referred to as "financial statements") are the responsibility of the Fund's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these financial
statements in accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of securities at August 31, 1999 by correspondence with the
custodian and brokers, provide a reasonable basis for the opinion expressed
above.
Boston, Massachusetts
October 11, 1999
/s/ PricewaterhouseCoopers LLP
8 Annual Report
<PAGE>
SSgA
International Growth Opportunities Fund
Statement of Net Assets
August 31, 1999
Market
Number Value
of (000)
Shares $
--------- -------
Common Stocks - 99.0%
Australia - 1.9%
Telstra Corp., Ltd. NPV 194,900 1,014
-------
Canada - 2.2%
Newbridge Networks Corp. (a) 42,200 1,157
-------
Denmark - 3.0%
Royal Dutch Petroleum Co. 14,610 904
Tele Danmark Class B - ADR 25,420 715
-------
1,619
-------
Finland - 2.5%
Nokia Corp. - ADR 15,860 1,322
-------
France - 8.4%
Axa - ADR 19,940 1,249
Credit Lyonnais NPV (a) 36,200 1,111
Sodexho 5,270 867
Total Co. SA - ADR 19,750 1,284
-------
4,511
-------
Germany - 10.4%
Allianz AG (Regd) 2,130 562
Bayer AG - ADR 16,980 739
DaimlerChrysler AG 7,800 586
Mannesmann AG 900 138
Mannesmann AG - ADR 9,540 1,466
Muenchener Rueckversicherungs-
Gesellschaft AG NPV 2,750 523
SAP AG - ADR 29,140 962
Volkswagen AG - ADR 47,090 568
-------
5,544
-------
Ireland - 2.1%
Bord Telecom Eireann PLC (a) 59,900 273
Jefferson Smurfit Group PLC 292,000 831
-------
1,104
-------
Italy - 5.3%
ENI SPA - ADR 7,160 433
Instituto Nazionale Delle
Assicurazioni - ADR 29,740 721
Istituto Bancario San Paolo di
Torino - ADR 30,973 830
Istituto Mobiliare Italiano SPA 10,000 135
Unicredito Italiano 158,410 733
-------
2,852
-------
Japan - 24.7%
Bank of Tokyo - Mitsubishi, Ltd. 8,000 120
Bank of Tokyo - Mitsubishi, Ltd. -
ADR 76,240 1,191
Canon, Inc. - ADR 35,980 1,075
Fuji Bank, Ltd. (The) - ADR 10,750 1,108
Honda Motor Co., Ltd. 3,000 121
Honda Motor Co., Ltd. - ADR 15,140 1,227
Internet Initiative Japan, Inc. -
ADR (a) 27,900 1,433
Matsushita Electric Industrial
Co., Ltd. 45,000 889
NTT Data Corp. 168 1,629
NTT Mobile Communication Network,
Inc. NPV 19 316
NTT Mobile Communications Network,
Inc. NPV New (a) 76 1,258
Sony Corp. - ADR 9,610 1,223
Takeda Chemical Industries 32,000 1,610
-------
13,200
-------
Netherlands - 6.3%
Koninklijke Ahold NV 23,500 843
Koninklijke KPN NV 19,800 888
Koninklijke (Royal) Philips Electronics
NV NY Reg Share NPV (a) 8,274 851
Annual Report 9
<PAGE>
SSgA
International Growth Opportunities Fund
Statement of Net Assets, continued
August 31, 1999
Market
Number Value
of (000)
Shares $
--------- -------
Royal Dutch Petroleum Co. 2,100 129
United Pan-Europe Communications
NV - ADR (a) 11,100 674
-------
3,385
-------
Singapore - 1.8%
Singapore Airlines, Ltd. (Alien
Market) 100,200 940
-------
Spain - 3.3%
Endesa SA - ADR 21,950 442
Telefonica de Espana SA - ADR (a) 26,902 1,296
-------
1,738
-------
Sweden - 2.7%
Ericsson (LM) Telephone Co. Class
B - ADR 44,520 1,447
-------
Switzerland - 1.5%
Roche Holdings AG - ADR 5,640 652
Roche Holdings Genusscheine AG NPV 11 128
-------
780
-------
United Kingdom - 22.9%
AstraZeneca Group PLC - ADR 16,470 649
Barclays PLC - ADR 7,090 835
BP Amoco PLC - ADR 9,597 1,076
British Petroleum Amoco Co. PLC 6,700 124
British Telecom PLC 8,800 135
British Telecommunications PLC - ADR 8,350 1,287
Diageo PLC - ADR 26,260 1,088
Elan Corp. PLC - ADR (a) 33,420 1,072
HSBC Holdings PLC 97,727 1,211
Royal & Sun Alliance Insurance
Group PLC (a) 137,490 1,145
Smithkline Beecham PLC - ADR 22,550 1,438
Unilever PLC - ADR (a) 28,863 1,109
Vodafone Airtouch PLC - ADR 4,720 946
Zeneca Group PLC 3,300 130
-------
12,245
-------
Total Common Stocks
(cost $47,426) 52,858
-------
Principal
Amount
(000)
$
---------
Short-Term Investments - 0.8%
United States - 0.8%
AIM Short Term Investment Prime
Portfolio (b) 454 454
Federated Investors Prime Cash
Obligations Fund (b) 1 1
-------
Total Short-Term Investments
(cost $455) 455
-------
Total Investments - 99.8%
(identified cost $47,881) 53,313
Other Assets and Liabilities,
Net - 0.2% 103
-------
Net Assets - 100.0% 53,416
=======
(a) Nonincome-producing security.
(b) At cost, which approximates market.
Abbreviations:
ADR - American Depositary Receipt
NPV - No Par Value
NV - Nonvoting
See the accompanying notes which are an integral part of the financial
statements.
10 Annual Report
<PAGE>
SSgA
International Growth Opportunities Fund
Statement of Net Assets, continued
August 31, 1999
Market
% of Value
Industrial Diversification Net (000)
(Unaudited) Assets $
- -------------------------------------------- -------- -------
Basic Industries 2.9 1,571
Capital Goods 3.0 1,604
Consumer Basics 16.3 8,718
Consumer Durables 8.7 4,614
Consumer Services 1.8 940
Energy 8.2 4,394
Finance 20.1 10,750
General Business 3.7 1,973
Miscellaneous 3.0 1,588
Technology 16.0 8,553
Utilities 15.3 8,153
Short-Term Investments 0.8 455
-------- -------
Total Investments 99.8 53,313
Other Assets and Liabilities, Net 0.2 103
-------- -------
Net Assets 100.0 53,416
======== =======
Market
% of Value
Geographic Diversification Net (000)
(Unaudited) Assets $
- -------------------------------------------- -------- -------
Europe 45.5 24,302
Japan 24.7 13,200
United Kingdom 22.9 12,245
Pacific Basin 3.7 1,954
Canada 2.2 1,157
Short-Term Investments 0.8 455
-------- -------
Total Investments 99.8 53,313
Other Assets and Liabilities, Net 0.2 103
-------- -------
Net Assets 100.0 53,416
======== =======
See the accompanying notes which are an integral part of the financial
statements.
Annual Report 11
<PAGE>
SSgA
International Growth Opportunities Fund
Statement of Assets and Liabilities
Amounts in thousands (except per share amount) August 31, 1999
<TABLE>
<S> <C> <C>
Assets
Investments at market (identified cost $47,881) .................................................... $ 53,313
Foreign currency holdings (identified cost $810) ................................................... 820
Receivables:
Dividends and interest .......................................................................... 100
Investments sold ................................................................................ 93
Fund shares sold ................................................................................ 43
Prepaid expenses ................................................................................... 11
Short-term investments held as collateral for securities loaned, at market ......................... 14,003
----------
Total Assets ................................................................................. 68,383
Liabilities
Payables:
Investments purchased ....................................................... $ 815
Fund shares redeemed ........................................................ 51
Accrued fees to affiliates .................................................. 64
Other accrued expenses ...................................................... 34
Payable upon return of securities loaned, at market ............................ 14,003
----------
Total Liabilities ............................................................................ 14,967
----------
Net Assets ......................................................................................... $ 53,416
==========
Net Assets Consist of:
Undistributed net investment income ................................................................ $ 334
Accumulated net realized gain (loss) ............................................................... (646)
Unrealized appreciation (depreciation) on investments .............................................. 5,432
Shares of beneficial interest ...................................................................... 5
Additional paid-in capital ......................................................................... 48,291
----------
Net Assets ......................................................................................... $ 53,416
==========
Net Asset Value, offering and redemption price per share:
($53,416,475 divided by 4,724,719 shares of $.001 par value
shares of beneficial interest outstanding) ................................................... $ 11.31
==========
</TABLE>
See the accompanying notes which are an integral part of the financial
statements.
12 Annual Report
<PAGE>
SSgA
International Growth Opportunities Fund
Statement of Operations
Amounts in thousands For the Fiscal Year Ended August 31, 1999
<TABLE>
<S> <C> <C>
Investment Income
Dividends (net of foreign taxes withheld of $82) ................................................ $ 804
Interest ........................................................................................ 41
----------
Total Investment Income ...................................................................... 845
Expenses
Advisory fees ............................................................... $ 281
Administrative fees ......................................................... 26
Custodian fees .............................................................. 53
Distribution fees ........................................................... 19
Transfer agent fees ......................................................... 24
Professional fees ........................................................... 20
Registration fees ........................................................... 36
Shareholder servicing fees .................................................. 12
Trustees' fees .............................................................. 1
Miscellaneous ............................................................... 16
----------
Expenses before reductions .................................................. 488
Expense reductions .......................................................... (76)
----------
Expenses, net ................................................................................ 412
----------
Net investment income .............................................................................. 433
----------
Net Realized and Unrealized Gain (Loss)
Net realized gain (loss) on:
Investments ................................................................. (610)
Foreign currency-related transactions ....................................... (40) (650)
----------
Net change in unrealized appreciation (depreciation) on investments ................................ 10,342
----------
Net realized and unrealized gain (loss) ............................................................ 9,692
----------
Net increase (decrease) in net assets resulting from operations .................................... $ 10,125
==========
</TABLE>
See the accompanying notes which are an integral part of the financial
statements.
Annual Report 13
<PAGE>
SSgA
International Growth Opportunities Fund
Statement of Changes in Net Assets
Amounts in thousands
<TABLE>
<CAPTION>
For the For the Period
Fiscal Year May 1, 1998*
Ended to
August 31, 1999 August 31, 1998
--------------- ---------------
<S> <C> <C>
Increase (Decrease) in Net Assets
Operations
Net investment income .................................................. $ 433 $ 80
Net realized gain (loss) ............................................... (650) (35)
Net change in unrealized appreciation (depreciation) ................... 10,342 (4,910)
--------- ---------
Net increase (decrease) in net assets resulting from operations ..... 10,125 (4,865)
--------- ---------
Distributions
From net investment income ............................................. (140) --
--------- ---------
Share Transactions
Net increase (decrease) in net assets from share transactions .......... 20,465 27,831
--------- ---------
Total Net Increase (Decrease) in Net Assets ............................... 30,450 22,966
Net Assets
Beginning of period .................................................... 22,966 --
--------- ---------
End of period (including undistributed net investment income of
$334 and $81, respectively) ......................................... $ 53,416 $ 22,966
========= =========
</TABLE>
* Commencement of operations.
See the accompanying notes which are an integral part of the financial
statements.
14 Annual Report
<PAGE>
SSgA
International Growth Opportunities Fund
Financial Highlights
The following table includes selected data for a share outstanding throughout
each period and other performance information derived from the financial
statements.
Fiscal Years Ended
August 31,
----------------------------
1999 1998*
---------- ----------
Net Asset Value, Beginning of Period ......... $ 8.42 $ 10.00
---------- ----------
Income From Operations
Net investment income (a) ................. .11 .03
Net realized and unrealized gain (loss) ... 2.83 (1.61)
---------- ----------
Total Income From Operations ........... 2.94 (1.58)
---------- ----------
Distributions
From net investment income ................ (.05) --
---------- ----------
Net Asset Value, End of Period ............... $ 11.31 $ 8.42
========== ==========
Total Return (%)(b) .......................... 35.08 (15.80)
Ratios/Supplemental Data:
Net Assets, end of period ($ in thousands) 53,416 22,966
Ratios to average net assets (%)(c):
Operating expenses, net (d) ............ 1.10 1.10
Operating expenses, gross (d) .......... 1.30 1.66
Net investment income .................. 1.16 1.27
Portfolio turnover rate (%)(c) ............ 39.19 17.24
* For the period May 1, 1998 (commencement of operations) to August 31,
1998.
(a) For the period subsequent to August 31, 1998, average month-end shares
outstanding were used for this calculation.
(b) Periods less than one year are not annualized.
(c) The ratios for the period ended August 31, 1998 are annualized.
(d) See Note 4 for current period amounts.
Annual Report 15
<PAGE>
SSgA
International Growth Opportunities Fund
Notes to Financial Statements
August 31, 1999
1. Organization
The SSgA Funds (the Investment Company) is a series mutual fund, currently
comprised of 23 investment portfolios which are in operation as of August
31, 1999. These financial statements report on one portfolio, the SSgA
International Growth Opportunities Fund (the "Fund"). The Investment
Company is a registered and diversified open-end investment company, as
defined in the Investment Company Act of 1940, as amended (the "1940
Act"), that was organized as a Massachusetts business trust on October 3,
1987 and operates under a First Amended and Restated Master Trust
Agreement, dated October 13, 1993, as amended (the "Agreement"). The
Investment Company's Agreement permits the Board of Trustees to issue an
unlimited number of full and fractional shares of beneficial interest at a
$.001 par value.
2. Significant Accounting Policies
The Fund's financial statements are prepared in accordance with generally
accepted accounting principles which require the use of management
estimates. The following is a summary of the significant accounting
policies consistently followed by the Fund in the preparation of its
financial statements.
Security valuation: International equity and fixed-income securities
traded on a national securities exchange are valued on the basis of the
last sale price. International securities traded over the counter are
valued on the basis of the mean of bid prices. In the absence of a last
sale or mean bid price, respectively, such securities may be valued on the
basis of prices provided by a pricing service if those prices are believed
to reflect the market value of such securities.
Money market instruments maturing within 60 days of the valuation date are
valued at amortized cost, a method by which each portfolio instrument is
initially valued at cost, and thereafter a constant accretion/amortization
to maturity of any discount or premium is assumed, unless the Board of
Trustees determines that amortized cost does not represent fair value.
The Fund may value certain securities for which market quotations are not
readily available at "fair value," as determined in good faith pursuant to
procedures established by the Board of Trustees.
Securities transactions: Securities transactions are recorded on the trade
date basis. Realized gains and losses from the securities transactions are
recorded on the basis of identified cost.
Investment income: Dividend income is recorded on the ex-dividend date and
interest income is recorded daily on the accrual basis.
Amortization and accretion: All zero-coupon bond discounts and original
issue discounts are accreted for both tax and financial reporting
purposes. All short- and long-term market premiums/discounts are
amortized/accreted for both tax and financial reporting purposes.
Federal income taxes: Since the Investment Company is a Massachusetts
business trust, each fund is a separate corporate taxpayer and determines
its net investment income and capital gains (or losses) and the amounts to
be distributed to each fund's shareholders without regard to the income
and capital gains (or losses) of the other funds.
16 Annual Report
<PAGE>
SSgA
International Growth Opportunities Fund
Notes to Financial Statements, continued
August 31, 1999
It is the Fund's intention to qualify as a regulated investment company,
as defined by the Internal Revenue Code of 1986, as amended. This requires
the Fund to distribute all of its taxable income. Therefore, the Fund paid
no federal income taxes and no federal income tax provision was required.
At August 31, 1999, the Fund had a net tax basis capital loss carryover of
$509,900, which may be applied against any realized net taxable gains in
each succeeding year or until its expiration date of August 31, 2007. As
permitted by tax regulations, the Fund intends to defer net realized
capital and currency losses of $180,778 incurred from November 1, 1998 to
August 31,1999, and treat them as arising in fiscal year 2000.
The Fund's aggregate cost of investments and the composition of unrealized
appreciation and depreciation of investment securities for federal income
tax purposes as of August 31, 1999 are as follows:
Net Unrealized
Unrealized Unrealized Appreciation
Federal Tax Cost Appreciation (Depreciation) (Depreciation)
---------------- ------------ -------------- --------------
$47,881,327 $8,434,613 $(3,002,799) $5,431,814
Dividends and distributions to shareholders: Income dividends and capital
gain distributions, if any, are recorded on the ex-dividend date. The Fund
declares and pays dividends annually. Capital gain distributions, if any,
are generally declared and paid annually. An additional distribution may
be paid by the Fund to avoid imposition of federal income tax on any
remaining undistributed net investment income and capital gains.
The timing and characterization of certain income and capital gain
distributions are determined in accordance with federal tax regulations
which may differ from generally accepted accounting principles ("GAAP").
As a result, net investment income and net realized gain (or loss) on
investment and foreign currency-related transactions for a reporting
period may differ significantly from distributions during such period. The
differences between tax regulations and GAAP relate primarily to
investments in foreign denominated investments, passive foreign investment
companies, foreign currency contracts and certain securities sold at a
loss. Accordingly, the Fund may periodically make reclassifications among
certain of its capital accounts without impacting its net asset value.
Expenses: Most expenses can be directly attributed to the individual Fund.
Expenses which cannot be directly attributed are allocated among all funds
based principally on their relative net assets.
Deferred organization expenses: The Fund has incurred expenses in
connection with its organization. These costs were deferred and are being
amortized over 60 months on a straight-line basis.
Foreign currency translations: The books and records of the Fund are
maintained in US dollars. Foreign currency amounts and transactions of the
Fund are translated into US dollars on the following basis:
(a) Market value of investment securities, other assets and liabilities
at the closing rate of exchange on the valuation date.
(b) Purchases and sales of investment securities and income at the
closing rate of exchange prevailing on the respective trade dates of
such transactions.
Annual Report 17
<PAGE>
SSgA
International Growth Opportunities Fund
Notes to Financial Statements, continued
August 31, 1999
Reported net realized gains or losses from foreign currency-related
transactions arise from sales and maturities of short-term securities;
sales of foreign currencies; currency gains or losses realized between the
trade and settlement dates on securities transactions; and the difference
between the amounts of dividends, interest, and foreign withholding taxes
recorded on the Fund's books and the US dollar equivalent of the amounts
actually received or paid. Net unrealized gains or losses from foreign
currency-related transactions arise from changes in the value of assets
and liabilities, other than investments in securities, at fiscal year-end,
resulting from changes in the exchange rates.
It is not practical to isolate that portion of the results of operations
of the Fund that arises as a result of changes in exchange rates, from
that portion that arises from changes in market prices of investments
during the year. Such fluctuations are included with the net realized and
unrealized gain or loss from investments. However, for federal income tax
purposes the Fund does isolate the effects of changes in foreign exchange
rates from the fluctuations arising from changes in market prices for
realized gain (or loss) on debt obligations.
Derivatives: To the extent permitted by the investment objectives,
restrictions and policies set forth in the Fund's Prospectus and Statement
of Additional Information, the Fund may participate in various
derivative-based transactions. Derivative securities are instruments or
agreements whose value is derived from an underlying security or index.
They include options, futures, swaps, forwards, structured notes and
stripped securities. These instruments offer unique characteristics and
risks that assist the Fund in meeting its investment strategies.
The Fund typically uses derivatives in three ways: cash equitization,
hedging, and return enhancement. Cash equitization is a technique that may
be used by the Fund through the use of options and futures to earn
"market-like" returns with the Fund's excess and liquidity reserve cash
balances. Hedging is used by the Fund to limit or control risks, such as
adverse movements in exchange rates and interest rates. Return enhancement
can be accomplished through the use of derivatives in the Fund. By
purchasing certain instruments, the Fund may more effectively achieve the
desired portfolio characteristics that assist in meeting the Fund's
investment objectives. Depending on how the derivatives are structured and
utilized, the risks associated with them may vary widely. These risks are
generally categorized as market risk, liquidity risk and counterparty or
credit risk.
Foreign currency exchange contracts: In connection with portfolio
purchases and sales of securities denominated in a foreign currency, the
Fund may enter into foreign currency exchange spot contracts and forward
foreign currency exchange contracts ("contracts"). Contracts are recorded
at market value. Certain risks may arise upon entering into these
contracts from the potential inability of counterparties to meet the terms
of their contracts and are generally limited to the amount of unrealized
gain on the contracts, if any, that are recognized in the accompanying
Statement of Assets and Liabilities. Realized gains or losses arising from
such transactions are included in net realized gain (or loss) from foreign
currency-related transactions.
Investment in international markets: Investing in international markets
may involve special risks and considerations not typically associated with
investing in the United States markets. These risks include revaluation of
currencies, high rates of inflation, repatriation, restrictions on income
and capital, and future adverse political and economic developments.
Moreover, securities issued in these markets may be less liquid, subject
to government ownership controls, delayed settlements, and their prices
more volatile than those of comparable securities in the United States.
18 Annual Report
<PAGE>
SSgA
International Growth Opportunities Fund
Notes to Financial Statements, continued
August 31, 1999
3. Securities Transactions
Investment transactions: For the year ended August 31, 1999, purchases and
sales of investment securities, excluding short-term investments,
aggregated to $34,843,462 and $14,412,558, respectively.
Securities Lending: Effective December 17, 1998, the Investment Company
started its securities lending program. The program allows each Fund to
loan securities with a value up to 33 1/3% of its total assets to certain
brokers. The Fund receives cash (U.S. currency), U.S. Government or U.S.
Government agency obligations as collateral against the loaned securities.
To the extent that a loan is secured by cash collateral, such collateral
shall be invested by State Street Bank and Trust Company in short-term
instruments, money market mutual funds, and such other short-term
investments, provided the investments meet certain quality and
diversification requirements. Under the securities lending arrangement,
the collateral received is recorded on the Fund's statement of assets and
liabilities along with the related obligation to return the collateral. In
those situations where the Company has relinquished control of securities
transferred, it derecognizes the securities and records a receivable from
the counterparty.
Income generated from the investment of cash collateral, less negotiated
rebate fees paid to participating brokers and transaction costs, is
divided between the Fund and State Street Bank and Trust Company and is
recorded as interest income for the Fund. To the extent that a loan is
secured by non-cash collateral, brokers pay the Fund negotiated lenders'
fees, which are divided between the Fund and State Street Bank and Trust
Company and are recorded as interest income for the Fund. All collateral
received will be in an amount at least equal to 102% (for loans of U.S.
securities) or 105% (for non-U.S. securities) of the market value of the
loaned securities at the inception of each loan. Should the borrower of
the securities fail financially, there is a risk of delay in recovery of
the securities or loss of rights in the collateral. Consequently, loans
are made only to borrowers which are deemed to be of good financial
standing. As of August 31, 1999, the value of outstanding securities on
loan and the value of collateral amounted to $13,606,375 and $14,002,765,
respectively. The Fund recorded securities lending income of $45,029
during the year.
4. Related Parties
Adviser: The Investment Company has an investment advisory agreement with
State Street Bank and Trust Company under which the Adviser directs the
investments of the Fund in accordance with its investment objectives,
policies, and limitations. For these services, the Fund pays a fee to the
Adviser, calculated daily and paid monthly, at the annual rate of .75% of
its average daily net assets. The Adviser voluntarily agreed to reimburse
the Fund for all expenses in excess of 1.10% of its average daily net
assets on an annual basis. As of August 31, 1999, the receivable due from
the Adviser for expenses in excess of the expense cap has been netted
against the Advisory fees payable. The Investment Company also has
contracts with the Adviser to provide custody, shareholder servicing and
transfer agent services to the Fund. These amounts are presented in the
accompanying Statement of Operations.
In addition, the Fund has entered into arrangements with its Adviser
whereby credits realized as a result of uninvested cash balances were used
to reduce a portion of the Fund's expenses. During the year, the Fund's
custodian fees were reduced by $1,308 under these arrangements.
Annual Report 19
<PAGE>
SSgA
International Growth Opportunities Fund
Notes to Financial Statements, continued
August 31, 1999
Administrator: The Investment Company has an administration agreement with
Frank Russell Investment Management Company (the "Administrator"), a
wholly-owned subsidiary of The Northwestern Mutual Life Insurance Company,
under which the Administrator supervises all non-portfolio investment
aspects of the Investment Company's operations and provides adequate
office space and all necessary office equipment and services, including
telephone service, utilities, stationery supplies, and similar items. The
Investment Company pays the Administrator the following fees for services
supplied by the Administrator pursuant to the Administration Agreement:
(i) an annual fee, payable monthly on a pro rata basis, based on the
following percentages of the average daily net assets of all international
funds: $0 up to and including $500 million - .07%, over $500 million to
and including $1 billion - .06%, over $1 billion to and including $1.5
billion - .04%, over $1.5 billion - .03%, and (ii) less an amount equal to
the sum of certain distribution-related expenses incurred by the
Investment Company's Distributor on behalf of the Fund (up to a maximum of
5%for the period May 1, 1998 to December 31, 1998, and 0% thereafter, of
the asset-based fee determined in (i)). In addition, the Fund reimburses
the Administrator for out-of-pocket expenses and start-up costs for new
funds.
Distributor and Shareholder Servicing: The Investment Company has a
Distribution Agreement with Russell Fund Distributors (the "Distributor")
which is a wholly-owned subsidiary of the Administrator to promote and
offer shares of the Investment Company. The Distributor may enter into
sub-distribution agreements with other non-related parties. The amounts
paid to the Distributor are included in the accompanying Statement of
Operations.
The Investment Company has a Distribution Plan pursuant to Rule 12b-1 (the
"Plan") under the 1940 Act. Under this Plan, the Investment Company is
authorized to make payments to the Distributor, or any Shareholder
Servicing Agent, as defined in the Plan, for providing distribution and
marketing services, for furnishing assistance to investors on an ongoing
basis, and for the reimbursement of direct out-of-pocket expenses charged
by the Distributor in connection with the distribution and marketing of
shares of the Investment Company and the servicing of investor accounts.
The Fund has service agreements with the Adviser, State Street Brokerage
Services, Inc. ("SSBSI"), a wholly-owned subsidiary of the Adviser, the
Adviser's Retirement Investment Services Division ("RIS"), the Adviser's
Metropolitan Division of Commercial Banking ("Commercial Banking") and
State Street Solutions ("Solutions")(collectively the "Agents"), as well
as several unaffiliated service providers. For these services, the Fund
pays .025%, .175%, .175%, .175% and .175%, to the Adviser, SSBSI, RIS,
Commercial Banking, and Solutions, respectively, based upon the average
daily value of all Fund shares held by or for customers of these Agents.
For the year ended August 31, 1999, the Fund was charged shareholder
servicing expenses of $9,360, $488, $43, $2,703, and $187 by the Adviser,
SSBSI, RIS Commercial Banking, and Solutions, respectively.
The combined distribution and shareholder servicing payments shall not
exceed .25% of the average daily value of net assets on an annual basis.
The shareholder servicing payments shall not exceed .20% of the average
daily value of net assets on an annual basis. Any payments that exceed the
maximum amount of allowable reimbursement may be carried forward for two
years following the year in which the expenditure was incurred so long as
the plan is in effect. The Fund's responsibility for any such expenses
carried forward shall terminate at the end of two years following the year
in which the expenditure was incurred. The Trustees or a majority of the
Fund's shareholders have the right, however, to terminate the Distribution
Plan and all payments thereunder at any time. The Fund will
20 Annual Report
<PAGE>
SSgA
International Growth Opportunities Fund
Notes to Financial Statements, continued
August 31, 1999
not be obligated to reimburse the Distributor for carryover expenses
subsequent to the Distribution Plan's termination or noncontinuance. There
were no carryover expenses as of August 31, 1999.
Board of Trustees: Through May 31, 1999, the Investment Company paid each
Trustee not affiliated with the Investment Company a retainer of $48,000
annually, $1,500 for each board meeting attended, an additional $1,500 for
attending the annual audit committee meeting, and reimbursement for
out-of-pocket expenses. As of June 1, 1999, each Trustee receives $2,500
for each board meeting attended, an additional $2,500 for attending the
annual audit committee meeting and $2,500 for the valuation committee fee
in addition to the $48,000 annual retainer. These expenses are allocated
among all of the Funds based upon their relative net assets.
Accrued fees payable to affiliates and trustees as of August 31, 1999 were
as follows:
Advisory fees $ 55,943
Administration fees 3,098
Custodian fees 1,155
Distribution fees 583
Shareholder servicing fees 810
Transfer agent fees 2,645
Trustees' fees 58
-----------
$ 64,292
===========
Beneficial Interest: As of August 31, 1999, one shareholder (who was also
an affiliate of the Investment Company) was a record owner of
approximately 10% of the total outstanding shares of the Fund.
5. Fund Share Transactions (amounts in thousands)
<TABLE>
<CAPTION>
For the Period May 1, 1998
Fiscal Year Ended (Commencement of Operations)
August 31, 1999 to August 31, 1998
------------------------ ----------------------------
Shares Dollars Shares Dollars
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Proceeds from shares sold ......... 2,497 $ 25,720 2,739 $ 27,935
Proceeds from reinvestment of
distributions .................. 5 43 -- --
Payments for shares redeemed ...... (504) (5,298) (11) (104)
--------- --------- --------- ---------
Total net increase (decrease) ..... 1,998 $ 20,465 2,728 $ 27,831
========= ========= ========= =========
</TABLE>
6. Line of Credit
The Fund and several affiliated Funds (the "Participants") share in a $50
million revolving credit facility for temporary or emergency purposes,
including the meeting of redemption requests that otherwise might require
the untimely disposition of securities. The Participants are charged an
annual commitment fee of .09% (.065% prior to July 15, 1999) on the
average daily unused amount of the Aggregate commitment, which is
allocated among each of the Participants. Interest, at the Federal Fund
Rate plus .50% annually, is calculated based on the market rates at the
time of the borrowing. The Fund may borrow up to a maximum of 33 1/3
percent of the value of it's net assets under the agreement. The Fund did
not have any drawdowns during the year.
Annual Report 21
<PAGE>
SSgA
International Growth Opportunities Fund
Tax Information
August 31, 1999 (Unaudited)
The Fund paid foreign taxes of $81,567 and recognized $839,226 of foreign
source income during the taxable year ended August 31, 1999. Pursuant to
Section 853 of the Internal Revenue Code, the Fund designates $.0173 per
share of foreign taxes paid and $.1776 of gross income earned from foreign
sources in the taxable year ended August 31, 1999.
Please consult a tax advisor for questions about federal or state income
tax laws.
22 Annual Report
<PAGE>
SSgA International Growth Opportunities Fund
One International Place, 27th Floor
Boston, Massachusetts 02110
(800) 997-7327
- --------------------------------------------------------------------------------
Trustees
Lynn L. Anderson, Chairman
William L. Marshall
Steven J. Mastrovich
Patrick J. Riley
Richard D. Shirk
Bruce D. Taber
Henry W. Todd
Officers
Lynn L. Anderson, President, Treasurer and CEO
Mark E. Swanson, Assistant Secretary, Assistant
Treasurer and Principal Accounting Officer
J. David Griswold, Vice President and Secretary
Deedra S. Walkey, Assistant Secretary
Rick J. Chase, Assistant Secretary
Carla L. Anderson, Assistant Secretary
Investment Adviser
State Street Bank and Trust Company
225 Franklin Street
Boston, Massachusetts 02110
Custodian, Transfer Agent and
Office of Shareholder Inquiries
State Street Bank and Trust Company
1776 Heritage Drive
North Quincy, Massachusetts 02171
(800) 647-7327
Distributor
Russell Fund Distributors, Inc.
One International Place, 27th Floor
Boston, Massachusetts 02110
(800) 997-7327
Administrator
Frank Russell Investment Management Company
909 A Street
Tacoma, Washington 98402
Legal Counsel
Goodwin, Procter & Hoar LLP
Exchange Place
Boston, Massachusetts 02109
Independent Accountants
PricewaterhouseCoopers LLP
160 Federal Street
Boston, Massachusetts 02110
Annual Report 23
<PAGE>
SSgA(R) Funds
High Yield Bond Fund
Annual Report
August 31, 1999
Table of Contents
Page
Chairman's Letter............................................. 4
Portfolio Management Discussion and Analysis.................. 6
Report of Independent Accountants............................. 8
Financial Statements.......................................... 9
Financial Highlights.......................................... 15
Notes to Financial Statements................................. 16
Fund Management and Service Providers......................... 21
"SSgA(R)" is a registered trademark of State Street Corporation and is licensed
for use by the SSgA Funds.
This report is prepared from the books and records of the Fund and it is
submitted for the general information of shareholders. This information is for
distribution to prospective investors only when preceded or accompanied by a
SSgA Funds Prospectus containing more complete information concerning the
investment objective and operations of the Fund, charges and expenses. The
Prospectus should be read carefully before an investment is made.
Performance is historical and assumes reinvestment of all dividends and capital
gains. Investment return and principal value will fluctuate so that an
investor's shares, when redeemed, may be worth more or less than when purchased.
Past performance is not indicative of future results. Russell Fund Distributors,
Inc., is the distributor of the SSgA Funds.
<PAGE>
SSgA High Yield Bond Fund
- --------------------------------------------------------------------------------
Letter From the Chairman of State Street Global Advisors
- --------------------------------------------------------------------------------
Dear Shareholders,
It is my pleasure to provide you with the SSgA Funds annual report for the
fiscal year ended August 31, 1999. The SSgA Fund family has grown to include
twenty-three portfolios covering a broad range of investment strategies. The
enclosed information provides an overview of the investment process for the SSgA
High Yield Bond Fund. This overview contains market updates, performance, and
financial information for the Fund. I hope you will find this information a
useful reference as you review your investment strategy.
During the past fiscal year, the SSgA Fund family has opened two new Funds. The
names and investment objectives for these funds are as follows:
The SSgA Aggressive Equity Fund seeks to maximize total return through investing
in US equity securities that are undervalued relative to their growth potential
as measured by SSgA's proprietary models.
The SSgA IAM Shares Fund seeks to maximize total return by investing primarily
in equity securities of companies that have entered into collective bargaining
agreements with the International Association of Machinists and Aerospace
Workers or affiliated labor unions.
Additionally, three SSgA Funds achieved a five-year track record during the 1999
fiscal year. These funds include the two institutional money market funds, SSgA
US Treasury and SSgA Prime Money Market Funds and the SSgA Emerging Markets
Fund. We are proud of our long-term record and look forward to having additional
funds complete their five-year anniversary.
In today's complex global marketplace, we are continually researching new
products and ideas to introduce to our fund family. Here at SSgA, we are
committed to providing a wide range of competitive investment vehicles to
fulfill your investment needs.
I would like to thank you for choosing the SSgA Funds.
Sincerely,
/s/ Nicholas A. Lopardo
Nicholas A. Lopardo
State Street Global Advisors
Chairman and Chief Executive Officer
4 Annual Report
<PAGE>
SSgA High Yield Bond Fund
- --------------------------------------------------------------------------------
Management of the Funds
- --------------------------------------------------------------------------------
[PHOTO]
Nicholas A. Lopardo
Chairman and Chief Executive Officer
A Team Approach to Investment Management
Our investment strategies are the product of the combined experience of our
professional staff. Portfolio Managers work together to develop and enhance the
techniques that drive our investment processes. As a result, the portfolios we
manage benefit from the knowledge of the entire team.
Mr. Bruce Walbridge, Principal, has been the portfolio manager primarily
responsible for investment decisions regarding the SSgA High Yield Bond Fund
since its inception in May 1998. Mr. Walbridge has been with State Street since
March 1987. Before joining the Fixed Income group in July 1993 as a credit
analyst, Mr. Walbridge was an assistant portfolio manager in the International
Equity group. Prior to the launch of the SSgA High Yield Bond Fund, he managed
several domestic bond portfolios including the $4 billion Flagship
Government/Corporate Bond Fund. Utilizing his credit analysis background, Mr.
Walbridge's focus over the last four and a half years has been on corporate bond
analysis and trading. There are three other portfolio managers working with Mr.
Walbridge.
Annual Report 5
<PAGE>
SSgA High Yield Bond Fund
- --------------------------------------------------------------------------------
Portfolio Management Discussion and Analysis
- --------------------------------------------------------------------------------
Objective: Maximize total return by investing primarily in non investment grade
corporate bonds.
Invests in: Primarily domestic, non-investment grade corporate bonds.
Strategy: Fund managers make investment decisions to seek excess returns above
the Lehman Brothers High Yield Bond Index.
- --------------------------------------------------------------------------------
GROWTH OF A $10,000 INVESTMENT
Dates High Yield Bond Fund Lehman Brothers High Yield Bond Index **
Inception* $10,000 $10,000
1998 $9,941 $9,569
1999 $11,056 $9,962
================================================================================
Performance Review
For the fiscal year ended August 31, 1999, the SSgA High Yield Bond Fund gained
11.21% versus 4.10% for the Lehman Brothers High Yield Bond Index. The Fund's
performance is net of operating expenses, whereas Index results do not include
expenses of any kind. The Fund's outperformance versus the benchmark was due
primarily to its ability to take advantage of the high yield market, which had
not fully recovered from the third quarter 1998 sell off. This resulted in
strong outperformance in fourth quarter 1998 and first quarter 1999. Superior
sector allocation and security selection throughout the year also contributed.
The Fund's strategy is to invest in debt securities of companies that have
strong management teams, assets that can be appropriately valued, and
predictable capital requirements. Current sector allocations include an
overweight in Energy,
- --------------------------------------------------------------------------------
SSgA Intermediate Fund
- --------------------------------------------------------------------------------
Period Ended Growth of Total
08/31/99 $10,000 Return
- -------------- ------------ -------
1 Year $ 11,121 11.21%
Inception $ 11,056 7.82%+
- --------------------------------------------------------------------------------
Lehman Brothers High Yield Bond Index
- --------------------------------------------------------------------------------
Period Ended Growth of Total
08/31/99 $10,000 Return
- -------------- ------------ -------
1 Year $ 10,410 4.10%
Inception $ 9,962 (0.29)%+
See related Notes on following page.
6 Annual Report
<PAGE>
SSgA High Yield Bond Fund
- --------------------------------------------------------------------------------
Portfolio Management Discussion and Analysis
- --------------------------------------------------------------------------------
Media and Telecommunications, neutral weight targets for Consumer Non-Cyclicals,
Capital Goods, Utilities, and Basic Materials, and an underweight target to
Consumer Cyclicals. The Fund's largest overweighting is in Telecommunications,
which the Manager believes will continue to have a positive impact to
performance on a long-term basis. Telecommunications is an attractive sector due
to the growth in data traffic driven by the Internet, multimedia applications,
and the need for network capacity. The Fund's tremendous performance over the
last year was due in part to an avoidance of any distressed securities within
the lowest quality segments, and as a result, the portfolio will remain
underweight the lowest quality securities.
Market and Portfolio Highlights
The second half of 1998 was an extreme test for the capital markets. The Russian
default in August, followed by the Long Term Capital Management crisis in
October, created a liquidity crunch. The Federal Reserve responded with a
reduction in short-term interest rates in October. The Fund's disciplined top
down scoring model allowed the Manager to take a cautious approach to the market
during this period. However, the model score had been weakening since July, and
as a result, the Manager began upgrading the portfolio, maintaining a defensive
posture on credit quality, sector and security. The Manager felt this approach
was necessary until it was clear that the Federal Reserve easing would provide
the capital markets and the economy the liquidity necessary to facilitate the
sponsorship and price recovery in the high yield market.
The Fund has been nearly fully invested from October 1998 through August 31,
1999. The Manager's scoring model allowed the Fund to capture the market's shift
towards a more positive sentiment in fourth quarter 1998. At that point, the
Manager began positioning the Fund more aggressively. The resulting broader
portfolio exposures include an increased weighting to single B-rated issues and
deferred coupons, as well as an allocation to more cyclical sectors that benefit
from the improving global economy and stronger high yield market. Specifically,
the Fund moved its Basic Materials allocation from underweight to neutral in
first quarter 1999, and moved its Energy allocation from neutral to overweight
early in second quarter 1999.
The Fund was managed consistently with its objective to maximize total return by
investing in fixed income securities, including those represented in the Lehman
Brothers High Yield Bond Index. At August 31, 1999, the Fund's duration was 4.94
versus 4.76 for the Index.
- --------------------------------------------------------
Top Ten Issuers
(as a percent of Total Investments) August 31, 1999
- --------------------------------------------------------
NTL, Inc. 4.2%
Gulf Canada Resources, Ltd. 4.0
Lear Corp. 3.2
Unisys Corp. 3.2
Verio, Inc. 3.0
Allied Waste North America 2.8
KPNQwest BV 2.8
Rhythms Netconnections, Inc. 2.7
NEXTLINK Communications, Inc. 2.5
HS Resources, Inc. 2.3
- --------------------------------------------------------
--------------------
Notes: The following notes relate to the Growth of $10,000 graph and table on
the preceding page.
* The High Yield Bond Fund commenced operations on May 5, 1998. Index
comparisons began May 1, 1998.
** The Lehman Brothers High Yield Bond Index includes all fixed income
securities having a maximum quality rating of Ba1 (including defaulted
issues), a minimum amount outstanding of $100 million, and at least 1 year
to maturity; PIKs and Eurodollars are excluded.
+ Annualized.
Performance is historical and assumes reinvestment of all dividends and capital
gains. Investment return and principal value will fluctuate so that an
investor's shares, when redeemed, may be worth more or less than when purchased.
Past performance is not indicative of future results.
Annual Report 7
<PAGE>
Report of Independent Accountants
To the Shareholders and Board of Trustees
of the SSgA Funds:
In our opinion, the accompanying statement of assets and liabilities and
statement of net assets, and the related statements of operations and of changes
in net assets and the financial highlights present fairly, in all material
respects, the financial position of SSgA High Yield Bond Fund (the "Fund") at
August 31, 1999, the results of its operations for the fiscal year then ended
and the changes in its net assets and the financial highlights for the fiscal
year then ended and for the period May 5, 1998 (commencement of operations) to
August 31, 1998, in conformity with generally accepted accounting principles.
These financial statements and financial highlights (hereafter referred to as
"financial statements") are the responsibility of the Fund's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in accordance
with generally accepted auditing standards which require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits, which included confirmation of securities at August
31, 1999 by correspondence with the custodian, provide a reasonable basis for
the opinion expressed above.
Boston, Massachusetts
October 11, 1999
/s/ PricewaterhouseCoopers LLP
8 Annual Report
<PAGE>
SSgA
High Yield Bond Fund
Statement of Net Assets
August 31, 1999
Principal Market
Amount Value
(000) (000)
$ $
--------- ---------
Long-Term Investments - 92.3%
Corporate Bonds and Notes - 77.9%
Adelphia Communications Corp.
9.875% due 03/01/07 500 509
AK Steel Corp.
7.875% due 02/15/09 500 474
Allied Waste North America
10.000% due 08/01/09 1,000 967
Arco Chemical Co.
9.900% due 11/01/00 300 303
Bresnan Communications Group,
L.L.C. Step Up Bond
Zero Coupon due 02/01/09 (a) 750 492
Canandaigua Brands, Inc.
8.500% due 03/01/09 500 473
Carmike Cinemas, Inc.
Series B
9.375% due 02/01/09 250 231
Chancellor Media Corp.
9.000% due 10/01/08 500 499
8.000% due 11/01/08 250 239
Chattem, Inc.
Series B
8.875% due 04/01/08 500 475
Citadel Broadcasting Co.
9.250% due 11/15/08 500 499
Classic Cable, Inc.
9.375% due 08/01/09 500 485
Concentra Operating Corp.
13.000% due 08/15/09 500 503
CSC Holdings, Inc.
9.250% due 11/01/05 600 630
Echostar DBS Corp.
9.250% due 02/01/06 500 493
Gentek, Inc.
11.000% due 08/01/09 500 510
Gulf Canada Resources, Ltd.
9.250% due 01/15/04 100 100
9.625% due 07/01/05 275 283
Harrahs Operating Co., Inc.
7.875% due 12/15/05 250 238
Hayes Lemmerz International, Inc.
9.125% due 07/15/07 350 347
HS Resources, Inc.
9.250% due 11/15/06 250 244
Series B
9.250% due 11/15/06 550 543
Huntsman ICI Chemicals, Inc.
10.125% due 07/01/09 500 498
Insight Health Services
Series B
9.625% due 06/15/08 500 470
Interep National Radio Sales, Inc.
Series B
10.000% due 07/01/08 250 255
Intersil Corp.
13.250% due 08/15/09 500 508
Iron Mountain, Inc.
8.750% due 09/30/09 450 424
ITC Deltacom, Inc.
9.750% due 11/15/08 500 510
K. Hovnanian Enterprises
9.125% due 05/01/09 500 480
L-3 Communications Corp.
8.500% due 05/15/08 525 515
Lear Corp.
7.960% due 05/15/05 500 491
9.500% due 07/15/06 600 620
Annual Report 9
<PAGE>
SSgA
High Yield Bond Fund
Statement of Net Assets, continued
August 31, 1999
Principal Market
Amount Value
(000) (000)
$ $
--------- ---------
Lenfest Communications, Inc.
10.500% due 06/15/06 250 287
Lyondell Chemical Co.
Series A
9.625% due 05/01/07 250 249
McLeodUSA, Inc.
8.125% due 02/15/09 750 690
Metromedia Fiber Network, Inc.
Series B
10.000% due 11/15/08 500 493
NCI Building Systems, Inc.
Series B
9.250% due 05/01/09 250 243
NEXTLINK Communications, Inc.
Step Up Bond
Zero Coupon due 06/01/09 (a) 1,500 872
Nortek, Inc.
Series B
8.875% due 08/01/08 500 508
NTL, Inc. Step Up Bond
Series A
Zero Coupon due 04/15/05 (a) 1,500 1,451
Packaging Corp. of America
9.625% due 04/01/09 750 759
PSINet, Inc.
11.000% due 08/01/09 500 494
Republic Technologies International
13.750% due 07/15/09 500 495
Rhythms Netconnections, Inc.
12.750% due 04/15/09 1,000 920
Santa Fe Snyder Corp.
8.050% due 06/15/04 500 492
Snyder Oil Corp.
8.750% due 06/15/07 500 494
Standard Pacific Corp.
8.500% due 04/01/09 500 466
Team Health, Inc.
12.000% due 03/15/09 500 510
Telecorp Pcs, Inc. Step Up Bond
Zero Coupon due 04/15/09 (a) 600 353
Unisys Corp.
11.750% due 10/15/04 1,000 1,103
Verio, Inc.
11.250% due 12/01/08 1,000 1,025
Vlasic Foods International, Inc.
10.250% due 07/01/09 500 465
Willis Corroon Corp.
9.000% due 02/01/09 500 471
---------
27,148
---------
Eurodollar Bonds - 7.3%
KPNQwest BV
8.125% due 06/01/09 1,000 950
Ono Finance PLC
13.000% due 05/01/09 500 530
Orange PLC
9.000% due 06/01/09 750 752
Telewest Communications PLC
Step Up Bond
Zero Coupon due 04/15/09 (a) 500 304
---------
2,536
---------
Yankee Bonds - 7.1%
Gulf Canada Resources
8.375% due 11/15/05 1,000 978
Metronet Communications Corp.
Step Up Bond
Zero Coupon due 06/15/08 (a) 1,000 765
Tembec Industries, Inc.
8.625% due 06/30/09 250 244
10 Annual Report
<PAGE>
SSgA
High Yield Bond Fund
Statement of Net Assets, continued
August 31, 1999
Principal Market
Amount Value
(000) (000)
$ $
--------- ---------
Versatel Telecom International NV
11.875% due 07/15/09 500 479
---------
2,466
---------
Total Long-Term Investments
(cost $32,567) 32,150
---------
Number of
Shares
---------
Preferred Stocks - 1.4%
Global Crossing Holdings, Ltd. 5 504
---------
Total Preferred Stocks
(cost $580) 504
---------
Principal
Amount
(000)
$
---------
Short-Term Investments - 4.9%
AIM Short-Term Investment Prime
Portfolio Class A (b) 1,286 1,286
Federated Investors Prime Cash
Obligations Fund (b) 153 153
Money Market Obligations Trust (b) 25 25
Weirton Steel Corp.
10.875% due 10/15/99 (b) 250 248
---------
Total Short-Term Investments
(cost $1,712) 1,712
---------
Total Investments - 98.6%
(identified cost $34,859) 34,366
Other Assets and Liabilities,
Net - 1.4% 481
---------
Net Assets - 100.0% 34,847
=========
(a) Adjustable or floating rate security.
(b) At cost, which approximates market.
Abbreviations:
NV - Nonvoting
See the accompanying notes which are an integral part of the financial
statements.
Annual Report 11
<PAGE>
SSgA
High Yield Bond Fund
Statement of Assets and Liabilities
Amounts in thousands (except per share amount) August 31, 1999
<TABLE>
<S> <C> <C>
Assets
Investments at market (identified cost $34,859) ................................ $ 34,366
Receivables:
Dividends and interest ...................................................... 672
Fund shares sold ............................................................ 53
Deferred organization expenses ................................................. 4
Prepaid expenses ............................................................... 11
-----------
Total Assets ............................................................. 35,106
Liabilities
Payables:
Fund shares redeemed ......................................... $ 211
Accrued fees to affiliates ................................... 23
Other accrued expenses ....................................... 25
-----------
Total Liabilities ........................................................ 259
-----------
Net Assets ..................................................................... $ 34,847
===========
Net Assets Consist of:
Undistributed net investment income ............................................ $ 649
Accumulated net realized gain (loss) ........................................... 1
Unrealized appreciation (depreciation) on investments .......................... (493)
Shares of beneficial interest .................................................. 3
Additional paid-in capital ..................................................... 34,687
-----------
Net Assets ..................................................................... $ 34,847
===========
Net Asset Value, offering and redemption price per share:
($34,847,225 divided by 3,377,618 shares of $.001 par value
shares of beneficial interest outstanding) ............................... $ 10.32
===========
</TABLE>
See the accompanying notes which are an integral part of the financial
statements.
12 Annual Report
<PAGE>
SSgA
High Yield Bond Fund
Statement of Operations
Amounts in thousands For the Fiscal Year Ended August 31, 1999
<TABLE>
<S> <C> <C>
Investment Income
Interest ............................................................................... $ 1,725
Dividends .............................................................................. 89
-----------
Total Investment Income ............................................................. 1,814
Expenses
Advisory fees ........................................................... $ 63
Administrative fees ..................................................... 7
Custodian fees .......................................................... 15
Distribution fees ....................................................... 13
Transfer agent fees ..................................................... 22
Professional fees ....................................................... 13
Registration fees ....................................................... 36
Shareholder servicing fees .............................................. 5
Trustees' fees .......................................................... 1
Amortization of deferred organization expenses .......................... 1
Miscellaneous ........................................................... 6
-----------
Expenses before reductions .............................................. 182
Expense reductions ...................................................... (45)
-----------
Expenses, net ....................................................................... 137
-----------
Net investment income ..................................................................... 1,677
-----------
Net Realized and Unrealized Gain (Loss)
Net realized gain (loss) on investments ................................................... 9
Net change in unrealized appreciation (depreciation) on investments ....................... (158)
-----------
Net realized and unrealized gain (loss) ................................................... (149)
-----------
Net increase (decrease) in net assets resulting from operations ........................... $ 1,528
===========
</TABLE>
See the accompanying notes which are an integral part of the financial
statements.
Annual Report 13
<PAGE>
SSgA
High Yield Bond Fund
Statement of Changes in Net Assets
Amounts in thousands For the Fiscal Years Ended August 31,
<TABLE>
<CAPTION>
1999 1998
----------- -----------
<S> <C> <C>
Increase (Decrease) in Net Assets
Operations
Net investment income ......................................... $ 1,677 $ 193
Net realized gain (loss) ...................................... 9 (7)
Net change in unrealized appreciation (depreciation) .......... (158) (335)
----------- -----------
Net increase (decrease) in net assets resulting from
operations .............................................. 1,528 (149)
----------- -----------
Distributions
From net investment income .................................... (1,196) (25)
From net realized gain on investments ......................... (1) --
----------- -----------
Net decrease from distributions ............................ (1,197) (25)
----------- -----------
Share Transactions
Net increase (decrease) in net assets from share transactions . 22,608 12,082
----------- -----------
Total Net Increase (Decrease) in Net Assets ...................... 22,939 11,908
Net Assets
Beginning of period ........................................... 11,908 --
----------- -----------
End of period (including undistributed net investment income of
$649 and $168, respectively) ............................... $ 34,847 $ 11,908
=========== ===========
</TABLE>
* For the period May 5, 1998 (commencement of operations) to August 31,
1998.
See the accompanying notes which are an integral part of the financial
statements.
14 Annual Report
<PAGE>
SSgA
High Yield Bond Fund
Financial Highlights
The following table includes selected data for a share outstanding throughout
each period and other performance information derived from the financial
statements.
Fiscal Years Ended
August 31,
------------------------
1999 1998
---------- ----------
Net Asset Value, Beginning of Period ............... $ 9.90 $ 10.00
---------- ----------
Income From Operations
Net investment income (a) ....................... .78 .18
Net realized and unrealized gain (loss) ......... .30 (.24)
---------- ----------
Total Income From Operations ................. 1.08 (.06)
---------- ----------
Distributions
From net investment income ...................... (.66) (.04)
---------- ----------
Net Asset Value, End of Period ..................... $ 10.32 $ 9.90
========== ==========
Total Return (%)(b) ................................ 11.21 (.59)
Ratios/Supplemental Data:
Net Assets, end of period ($ in thousands) ...... 34,847 11,908
Ratios to average net assets (%)(c):
Operating expenses, net (d) .................. .65 .65
Operating expenses, gross (d) ................ .87 1.66
Net investment income ........................ 7.97 6.38
Portfolio turnover rate (%)(e) .................. 234.31 173.64
* For the period May 5, 1998 (commencement of operations) to August 31,
1998.
(a) For the period subsequent to August 31, 1998, average month-end shares
outstanding were used for this calculation.
(b) Periods less than one year are not annualized.
(c) The ratios for the period ended August 31, 1998 are annualized.
(d) See Note 4 for current period amounts.
(e) The ratio for the period ended August 31, 1998 has not been annualized due
to the Fund's short period of operation.
Annual Report 15
<PAGE>
SSgA
High Yield Bond Fund
Notes to Financial Statements
August 31, 1999
1. Organization
The SSgA Funds (the "Investment Company") is a series mutual fund,
currently comprised of 23 investment portfolios which are in operation as
of August 31, 1999. These financial statements report on one portfolio,
the SSgA High Yield Bond Fund (the "Fund"). The Investment Company is a
registered and diversified open-end investment company, as defined in the
Investment Company Act of 1940, as amended (the "1940 Act"), that was
organized as a Massachusetts business trust on October 3, 1987 and
operates under a First Amended and Restated Master Trust Agreement, dated
October 13, 1993, as amended (the "Agreement"). The Investment Company's
Agreement permits the Board of Trustees to issue an unlimited number of
full and fractional shares of beneficial interest at a $.001 par value.
2. Significant Accounting Policies
The Fund's financial statements are prepared in accordance with generally
accepted accounting principles which require the use of management
estimates. The following is a summary of the significant accounting
policies consistently followed by the Fund in the preparation of its
financial statements.
Security valuation: United States fixed-income securities listed and
traded principally on any national securities exchange are valued on the
basis of the last sale price or, lacking any sale, at the closing bid
price, on the primary exchange on which the security is traded. United
States over-the-counter, fixed-income securities and options are valued on
the basis of the closing bid price.
Many fixed-income securities do not trade each day, and thus last sale or
bid prices are frequently not available. Fixed-income securities may be
valued using prices provided by a pricing service when such prices are
believed to reflect the market value of such securities.
Money market instruments maturing within 60 days of the valuation date are
valued at amortized cost, a method by which each portfolio instrument is
initially valued at cost, and thereafter a constant accretion/amortization
to maturity of any discount or premium is assumed, unless the Board of
Trustees determines that amortized cost does not represent fair value.
The Fund may value securities for which market quotations are not readily
available at "fair value," as determined in good faith pursuant to
procedures established by the Board of Trustees.
Securities transactions: Securities transactions are recorded on a trade
date basis. Realized gains and losses from securities transactions are
recorded on the basis of identified cost.
Investment income: Dividend income is recorded on the ex-dividend date and
interest income is recorded daily on the accrual basis.
Amortization and accretion: All zero-coupon bond discounts and original
issue discounts are accreted for both tax and financial reporting
purposes. All short- and long-term market premiums/discounts are
amortized/accreted for both tax and financial reporting purposes.
16 Annual Report
<PAGE>
SSgA
High Yield Bond Fund
Notes to Financial Statements, continued
August 31, 1999
Federal income taxes: Since the Investment Company is a Massachusetts
business trust, each fund is a separate corporate taxpayer and determines
its net investment income and capital gains (or losses) and the amounts to
be distributed to each fund's shareholders without regard to the income
and capital gains (or losses) of the other funds.
It is the Fund's intention to qualify as a regulated investment company,
as defined by the Internal Revenue Code of 1986, as amended. This requires
the Fund to distribute all of its taxable income. Therefore, the Fund paid
no federal income taxes and no federal income tax provision was required.
The Fund's aggregate cost of investments and the composition of unrealized
appreciation and depreciation of investment securities for federal income
tax purposes as of August 31, 1999 are as follows:
Net Unrealized
Federal Tax Unrealized Unrealized Appreciation
Cost Appreciation (Depreciation) (Depreciation)
----------- ------------ -------------- --------------
$34,859,158 $ 303,995 $ (797,491) $ (493,496)
Dividends and distributions to shareholders: Income dividends and capital
gain distributions, if any, are recorded on the ex-dividend date.
Dividends are generally declared and paid quarterly. Capital gain
distributions are generally declared and paid annually. An additional
distribution may be paid by the Fund to avoid imposition of federal income
tax on any remaining undistributed net investment income and capital
gains.
The timing and characterization of certain income and capital gain
distributions are determined in accordance with federal tax regulations
which may differ from generally accepted accounting principles ("GAAP").
As a result, net investment income and net realized gain (or loss) on
investment transactions for a reporting period may differ significantly
from distributions during such period. The differences between tax
regulations and GAAP relate primarily to investment in certain fixed
income securities purchased at a discount, mortgage-backed securities and
certain securities sold at a loss. Accordingly, the Fund may periodically
make reclassifications among certain of its capital accounts without
impacting its net asset value.
Expenses: Most expenses can be directly attributed to the Fund. Expenses
which cannot be directly attributed are allocated among all funds based
principally on their relative net assets.
Deferred organization expenses: The Fund incurred expenses in connection
with its organization. These costs were deferred and are being amortized
over 60 months on a straight-line basis.
3. Securities Transactions
Investment transactions: For the year ended August 31, 1999, purchases and
sales of investment securities, excluding US Government and Agency
obligations and short-term investments, aggregated to $55,918,818 and
$31,570,775, respectively.
For the year ended August 31, 1999, purchases and sales of US Government
and Agency obligations, excluding short-term investments, aggregated to
$13,220,855 and $15,260,347, respectively.
Annual Report 17
<PAGE>
SSgA
High Yield Bond Fund
Notes to Financial Statements, continued
August 31, 1999
Securities Lending: Effective December 17, 1998, the Investment Company
started its securities lending program. The program allows each Fund to
loan securities with a value up to 33 1/3% of its total assets to certain
brokers. The Fund receives cash (U.S. currency), U.S. Government or U.S.
Government agency obligations as collateral against the loaned securities.
To the extent that a loan is secured by cash collateral, such collateral
shall be invested by State Street Bank and Trust Company in short-term
instruments, money market mutual funds, and such other short-term
investments, provided the investments meet certain quality and
diversification requirements. Under the securities lending arrangement,
the collateral received is recorded on the Fund's statement of assets and
liabilities along with the related obligation to return the collateral. In
those situations where the Company has relinquished control of securities
transferred, it derecognizes the securities and records a receivable from
the counterparty.
Income generated from the investment of cash collateral, less negotiated
rebate fees paid to participating brokers and transaction costs, is
divided between the Fund and State Street Bank and Trust Company and is
recorded as interest income for the Fund. To the extent that a loan is
secured by non-cash collateral, brokers pay the Fund negotiated lenders'
fees, which are divided between the Fund and State Street Bank and Trust
Company and are recorded as interest income for the Fund. All collateral
received will be in an amount at least equal to 102% (for loans of U.S.
securities) or 105% (for non-U.S. securities) of the market value of the
loaned securities at the inception of each loan. Should the borrower of
the securities fail financially, there is a risk of delay in recovery of
the securities or loss of rights in the collateral. Consequently, loans
are made only to borrowers which are deemed to be of good financial
standing. As of August 31, 1999, there were no outstanding securities on
loan.
4. Related Parties
Adviser: The Investment Company has an investment advisory agreement with
State Street Bank and Trust Company under which the Adviser directs the
investments of the Fund in accordance with its investment objectives,
policies, and limitations. For these services, the Fund pays a fee to the
Adviser, calculated daily and paid monthly, at the annual rate of .30% of
its average daily net assets. The Adviser has agreed to reimburse the Fund
for all expenses in excess of .65% of average daily net assets on an
annual basis. The Investment Company also has contracts with the Adviser
to provide custody, shareholder servicing and transfer agent services to
the Fund. These amounts are presented in the accompanying Statement of
Operations.
In addition, the Fund has entered into arrangements with its Adviser
whereby credits realized as a result of uninvested cash balances were used
to reduce a portion of the Fund's expenses. During the period, the Fund's
custodian fees were reduced by $2,190 under these arrangements.
Administrator: The Investment Company has an administration agreement with
Frank Russell Investment Management Company (the "Administrator"), a
wholly owned subsidiary of The Northwestern Mutual Life Insurance Company,
under which the Administrator supervises all non-portfolio investment
aspects of the Investment Company's operations and provides adequate
office space and all necessary office equipment and services, including
telephone service, utilities, stationery supplies, and similar items. The
Investment Company pays the Administrator the following fees for services
supplied by the Administrator pursuant to the Administration Agreement:
(i) an annual fee, payable monthly on a pro rata basis, based on the
following percentages of the average daily net assets of all domestic
funds: $0 up to and including $500 million - .06%; over $500 million to
and including $1 billion - .05%; over $1 billion - .03%, and (ii) less an
amount equal to the sum of
18 Annual Report
<PAGE>
SSgA
High Yield Bond Fund
Notes to Financial Statements, continued
August 31, 1999
certain distribution-related expenses incurred by the Investment Company's
Distributor on behalf of the Fund (up to a maximum of 5% for the period
May 5, 1998 to December 31, 1998, and 0% thereafter, of the asset-based
fee determined in (i)). In addition, the Fund reimburses the Administrator
for out-of-pocket expenses and start-up costs for new funds.
Distributor and Shareholder Servicing: The Investment Company has a
Distribution Agreement with Russell Fund Distributors (the "Distributor")
which is a wholly-owned subsidiary of the Administrator to promote and
offer shares of the Investment Company. The Distributor may enter into
sub-distribution agreements with other non-related parties. The amounts
paid to the Distributor are included in the accompanying Statement of
Operations.
The Investment Company has a Distribution Plan pursuant to Rule 12b-1 (the
"Plan") under the 1940 Act. Under this Plan, the Investment Company is
authorized to make payments to the Distributor, or any Shareholder
Servicing Agent, as defined in the Plan, for providing distribution and
marketing services, for furnishing assistance to investors on an ongoing
basis, and for the reimbursement of direct out-of-pocket expenses charged
by the Distributor in connection with the distribution and marketing of
shares of the Investment Company and the servicing of investor accounts.
The Fund has service agreements with the Adviser, the Adviser's Retirement
Investment Services Division ("RIS"), the Adviser's Metropolitan Division
of Commercial Banking ("Commercial Banking") and State Street Solutions
("Solutions")(collectively the "Agents"), as well as several unaffiliated
service providers. For these services, the Fund pays .025%, .175%, .175%,
.175%, and .175% to the Adviser, SSBSI, RIS, Commercial Banking, and
Solutions, respectively, based upon the average daily value of all Fund
shares held by or for customers of these Agents. For the year ended August
31, 1999, the Fund was charged shareholder servicing expenses of $4,600,
$107 and $114 by the Adviser, SSBSI and Commercial Banking. The Fund did
not incur any expenses from RIS or Solutions during this period.
The combined distribution and shareholder servicing payments shall not
exceed .25% of the average daily value of net assets on an annual basis.
The shareholder servicing payments shall not exceed .20% of the average
daily value of net assets on an annual basis. Any payments that exceed the
maximum amount of allowable reimbursement may be carried forward for two
years following the year in which the expenditure was incurred so long as
the plan is in effect. The Fund's responsibility for any such expenses
carried forward shall terminate at the end of two years following the year
in which the expenditure was incurred. The Trustees or a majority of the
Fund's shareholders have the right, however, to terminate the Distribution
Plan and all payments thereunder at any time. The Fund will not be
obligated to reimburse the Distributor for carryover expenses subsequent
to the Distribution Plan's termination or noncontinuance. There were no
carryover expenses as of August 31, 1999.
Board of Trustees: Through May 31, 1999, the Investment Company paid each
Trustee not affiliated with the Investment Company a retainer of $48,000
annually, $1,500 for each board meeting attended, an additional $1,500 for
attending the annual audit committee meeting, and reimbursement for
out-of-pocket expenses. As of June 1, 1999, each Trustee receives $2,500
for each board meeting attended, an additional $2,500 for attending the
annual audit committee meeting and $2,500 for the valuation committee fee
in addition to the $48,000 annual retainer. These expenses are allocated
among all of the Funds based upon their relative net assets.
Annual Report 19
<PAGE>
SSgA
High Yield Bond Fund
Notes to Financial Statements, continued
August 31, 1999
Accrued fees payable to affiliates and trustees as of August 31, 1999 were
as follows:
Advisory fees $ 16,729
Administration fees 924
Custodian fees 2,096
Distribution fees 70
Shareholder servicing fees 606
Transfer agent fees 2,405
Trustees' fees 94
----------
$ 22,924
==========
Beneficial Interest: As of August 31, 1999, one shareholder (who is also a
series of the Investment Company) was a record owner of approximately 13%
of the total outstanding shares of the Fund.
5. Fund Share Transactions (amounts in thousands)
<TABLE>
<CAPTION>
For the Period May 5, 1998
Fiscal Year Ended (Commencement of Operations)
August 31, 1999 to August 31, 1998
------------------------------ -----------------------------
Shares Dollars Shares Dollars
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Proceeds from shares sold.................... 2,289 $ 23,775 1,215 $ 12,208
Proceeds from reinvestment of distributions.. 13 131 -- --
Payments for shares redeemed................. (127) (1,298) (12) (126)
------------ ------------ ------------ ------------
Total net increase (decrease)................ 2,175 $ 22,608 1,203 $ 12,082
============ ============ ============ ============
</TABLE>
6. Line of Credit
The Fund and several affiliated Funds (the "Participants") share in a $50
million revolving credit facility for temporary or emergency purposes,
including the meeting of redemption requests that otherwise might require
the untimely disposition of securities. The Participants are charged an
annual commitment fee of .09% (.065% prior to July 15, 1999) on the
average daily unused amount of the aggregate commitment, which is
allocated among each of the Participants. Interest, at the Federal Fund
Rate plus .50% annually, is calculated based on the market rates at the
time of the borrowing. The Fund may borrow up to a maximum of 33 1/3
percent of the value of it's net assets under the agreement. The Fund did
not have any drawdowns during the year.
7. Dividends
On September 1, 1999, the Board of Trustees declared a dividend of $.1920
from net investment income, payable on September 7, 1999 to shareholders
of record on September 2, 1999.
20 Annual Report
<PAGE>
SSgA High Yield Bond Fund
One International Place, 27th Floor
Boston, Massachusetts 02110
(800) 997-7327
- --------------------------------------------------------------------------------
Trustees
Lynn L. Anderson, Chairman
William L. Marshall
Steven J. Mastrovich
Patrick J. Riley
Richard D. Shirk
Bruce D. Taber
Henry W. Todd
Officers
Lynn L. Anderson, President, Treasurer and CEO
Mark E. Swanson, Assistant Secretary, Assistant
Treasurer and Principal Accounting Officer
J. David Griswold, Vice President and Secretary
Deedra S. Walkey, Assistant Secretary
Rick J. Chase, Assistant Secretary
Carla L. Anderson, Assistant Secretary
Investment Adviser
State Street Bank and Trust Company
225 Franklin Street
Boston, Massachusetts 02110
Custodian, Transfer Agent and
Office of Shareholder Inquiries
State Street Bank and Trust Company
1776 Heritage Drive
North Quincy, Massachusetts 02171
(800) 647-7327
Distributor
Russell Fund Distributors, Inc.
One International Place, 27th Floor
Boston, Massachusetts 02110
(800) 997-7327
Administrator
Frank Russell Investment Management Company
909 A Street
Tacoma, Washington 98402
Legal Counsel
Goodwin, Procter & Hoar LLP
Exchange Place
Boston, Massachusetts 02109
Independent Accountants
PricewaterhouseCoopers LLP
160 Federal Street
Boston, Massachusetts 02110
Annual Report 21
<PAGE>
SSgA(R) Funds
Special Equity Fund
Annual Report
August 31, 1999
Table of Contents
Page
Chairman's Letter............................................. 4
Portfolio Management Discussion and Analysis.................. 6
Report of Independent Accountants............................. 8
Financial Statements.......................................... 9
Financial Highlights.......................................... 14
Notes to Financial Statements................................. 15
Fund Management and Service Providers......................... 20
"SSgA(R)" is a registered trademark of State Street Corporation and is licensed
for use by the SSgA Funds.
This report is prepared from the books and records of the Fund and it is
submitted for the general information of shareholders. This information is for
distribution to prospective investors only when preceded or accompanied by a
SSgA Funds Prospectus containing more complete information concerning the
investment objective and operations of the Fund, charges and expenses. The
Prospectus should be read carefully before an investment is made.
Performance is historical and assumes reinvestment of all dividends and capital
gains. Investment return and principal value will fluctuate so that an
investor's shares, when redeemed, may be worth more or less than when purchased.
Past performance is not indicative of future results. International markets
entail different risks than those typically associated with domestic markets,
including currency fluctuations, political and economic instability, accounting
changes and foreign taxation. Securities may be less liquid and more volatile.
Please see the Prospectus for further details. Russell Fund Distributors, Inc.,
is the distributor of the SSgA Funds.
<PAGE>
SSgA Special Equity Fund
- --------------------------------------------------------------------------------
Letter From the Chairman of State Street Global Advisors
- --------------------------------------------------------------------------------
Dear Shareholders,
It is my pleasure to provide you with the SSgA Funds annual report for the
fiscal year ended August 31, 1999. The SSgA Fund family has grown to include
twenty-three portfolios covering a broad range of investment strategies. The
enclosed information provides an overview of the investment process for the SSgA
Special Equity Fund. This overview contains market updates, performance, and
financial information for the Fund. I hope you will find this information a
useful reference as you review your investment strategy.
During the past fiscal year, the SSgA Fund family has opened two new Funds. The
names and investment objectives for these funds are as follows:
The SSgA Aggressive Equity Fund seeks to maximize total return through investing
in US equity securities that are undervalued relative to their growth potential
as measured by SSgA's proprietary models.
The SSgA IAM Shares Fund seeks to maximize total return by investing primarily
in equity securities of companies that have entered into collective bargaining
agreements with the International Association of Machinists and Aerospace
Workers or affiliated labor unions.
Additionally, three SSgA Funds achieved a five-year track record during the 1999
fiscal year. These funds include the two institutional money market funds, SSgA
US Treasury and SSgA Prime Money Market Funds and the SSgA Emerging Markets
Fund. We are proud of our long-term record and look forward to having additional
funds complete their five-year anniversary.
In today's complex global marketplace, we are continually researching new
products and ideas to introduce to our fund family. Here at SSgA, we are
committed to providing a wide range of competitive investment vehicles to
fulfill your investment needs.
I would like to thank you for choosing the SSgA Funds.
Sincerely,
/s/ Nicholas A. Lopardo
Nicholas A. Lopardo
State Street Global Advisors
Chairman and Chief Executive Officer
4 Annual Report
<PAGE>
SSgA Special Equity Fund
- --------------------------------------------------------------------------------
Management of the Funds
- --------------------------------------------------------------------------------
[PHOTO]
Nicholas A. Lopardo
Chairman and Chief Executive Officer
A Team Approach to Investment Management
Our investment strategies are the product of the combined experience of our
professional staff. Portfolio Managers work together to develop and enhance the
techniques that drive our investment processes. As a result, the portfolios we
manage benefit from the knowledge of the entire team.
Mr. Guy Scott, CFA, Principal, has been the portfolio manager primarily
responsible for investment decisions regarding the SSgA Special Equity Fund
since April 1999. Prior to joining SSgA, Mr. Scott was a Senior Vice President
and portfolio manager at The Boston Company. While there, he served on the
Investment Policy Committee and had direct responsibility for managing mutual
funds, including small capitalization portfolios, and over $1 billion in
institutional accounts. He was also a founder and Managing Director of Frontier
Capital Management Company. He moved to the Boston area in 1978 to join Putnam
Advisory Company as a Senior Portfolio Manager and a member of their Investment
Policy Committee. He has been highlighted in Barron's Business Journal for his
capabilities as a Small Capitalization Equity Manager. Prior to entering the
financial industry, he served as a Captain in the United States Marine Corps.
Mr. Scott received an MBA as well as a BS with honors from the University of
Wisconsin. There are seven other portfolio managers working with Mr. Scott.
Annual Report 5
<PAGE>
SSgA Special Equity Fund
- --------------------------------------------------------------------------------
Portfolio Management Discussion and Analysis
- --------------------------------------------------------------------------------
Objective: The SSgA Special Equity Fund seeks to maximize total return through
investments in mid- and small capitalization US equity securities.
Invests in: Mid- and small capitalization US equity securities.
Strategy: Effective April 30, 1999, the Fund changed its investment approach
from a quantitative to a fundamental focus. The Fund now attempts to meet its
objective through the active selection of equity securities through the
fundamental analysis of companies and investment themes. Using both qualitative
research and quantitative screens, we identify a universe of quality small cap
stocks with superior long-term growth prospects, which are trading at reasonable
valuations. After assessing the prospects for each sector, we select those
stocks positioned to outperform, diversifying as far as possible without
diluting the opportunities for significant returns. Stocks are selected on a
number of qualitative factors including earnings acceleration, balance sheet
fundamentals, strong growth and consistency of earnings, competitive advantage
and superior management.
- --------------------------------------------------------------------------------
GROWTH OF A $10,000 INVESTMENT
Dates Special Equity Fund Russell Special Small Company Index **
Inception* $10,000 $10,000
1998 $7,170 $7,345
1999 $9,182 $10,113
================================================================================
- --------------------------------------------------------------------------------
SSgA Special Equity Fund
- --------------------------------------------------------------------------------
Period Ended Growth of Total
08/31/99 $10,000 Return
- -------------- ------------ -------
1 Year $ 12,806 28.06%
Inception $ 9,182 (6.20)%+
- --------------------------------------------------------------------------------
Russell Special Small Company Index
- --------------------------------------------------------------------------------
Period Ended Growth of Total
08/31/99 $10,000 Return
- -------------- ------------ -------
1 Year $ 13,768 37.68%
Inception $ 10,113 0.85%+
See related Notes on following page.
6 Annual Report
<PAGE>
SSgA Special Equity Fund
- --------------------------------------------------------------------------------
Portfolio Management Discussion and Analysis
- --------------------------------------------------------------------------------
Performance Review
For the fiscal year ended August 31, 1999 the SSgA Special Equity Fund gained
28.06%. This compares with the Russell Special Small Company Index (RSMALL),
which posted a gain of 37.68% for the same period. The Fund's performance is net
of operating expenses, whereas Index results do not include expenses of any
kind. The greatest impact on the Fund's performance during the period is
attributable to overweighting in both the Communication and the Health Care
sectors, as well as favorable stock selection. At fiscal year end, over 30% of
the portfolio was invested in Communication issues (versus a benchmark weight of
17%) and over 10% in Health Care stocks (as compared to the benchmark weight of
7.4%). To a lesser extent, the Fund also benefited from an overweighting in the
Energy sector (10.6% at August 31, 1999, versus 3.9% for the benchmark) and an
underweighting in the Financial Service sector (5.1% as compared to 15.4% for
the benchmark), with the latter generating a negative return during the last
four months of the year. Conversely, as a result of its quantitative approach,
the Fund suffered early in the period from an underweight in the outperforming
Technology sector, and in particular, new Internet-related issues. This
underweight exposure was largely corrected by fiscal year-end, with the Fund's
allocation at 19.1% versus the benchmark weight of 19.8%.
Market and Portfolio Highlights
The small cap market rallied during 1999, with the RSMALL Index returning 37.68%
for the twelve month period ended August 31, 1999. This compares with the S&P
500(R) Index results of 39.84% for the same period. To compare, at December 31,
1998, the annual return for the RSMALL Index was 7.28%, versus 28.6% for the S&P
500 Index, illustrating the recovery of the small cap market during 1999.
Throughout the year there the market has experienced a significant sector
rotation. While growth-related sectors were favored through late 1998, value
orientated stocks led the market in April 1999, as investors capitalized on the
attractive valuations in this neglected segment of the market. Three sectors
that have helped in adding value to the Fund since April were Communications,
Energy, and Health Care. These sectors posted modest yet strong absolute returns
of 48.5% and 40.7%, and 39.5%, respectively. The market was very narrow late in
1998 into 1999, with very few stocks (primarily Internet issues) driving the
bulk of returns.
For the fiscal year ended August 31, 1999, the SSgA Special Equity Fund held 45
stocks with a weighted average market capitalization of $3.2 billion. The Fund
has portfolio characteristics in line with the RSMALL Index, reflecting the
risk-controlled nature of the investment process. As the Fund's objective is
achieved through active fundamental stock selection, the portfolio will seek to
be fully invested at all times.
- --------------------------------------------------------
Top Ten Equity Holdings
(as a percent of Total Investments) August 31, 1999
- --------------------------------------------------------
IDEC Pharmaceuticals Corp. 4.3%
Exodus Communications, Inc. 3.8
Allegiance Telecom, Inc. 3.4
Biogen, Inc. 3.3
Micromuse, Inc. 3.3
VoiceStream Wireless Corp. NPV 3.1
Western Wireless Corp. NPV Class A 3.0
MedImmune, Inc. 2.9
Phone.com, Inc. 2.8
Conexant Systems, Inc. 2.8
- --------------------------------------------------------
---------------------
Notes: The following notes relate to the Growth of $10,000 graph and table on
the preceding page.
* The Fund commenced operations on May 1, 1998. Index comparison also began
May 1, 1998.
** The Russell Special Small Company Index (the RSMALL Index) is defined as
the Russell 3000(R) Index minus the S&P 500(R) Index. Approximately 40% of
the RSMALL Index is comprised of the small cap stocks, while the remaining
60% are mid-cap issues.
+ Annualized.
Performance is historical and assumes reinvestment of all dividends and capital
gains. Investment return and principal value will fluctuate so that an
investor's shares, when redeemed, may be worth more or less than when purchased.
Past performance is not indicative of future results.
Annual Report 7
<PAGE>
Report of Independent Accountants
To the Shareholders and Board of Trustees
of the SSgA Funds:
In our opinion, the accompanying statement of assets and liabilities and
statement of net assets, and the related statements of operations and of changes
in net assets and the financial highlights present fairly, in all material
respects, the financial position of SSgA Special Equity Fund (the "Fund") at
August 31, 1999, the results of its operations for the fiscal year then ended
and the changes in its net assets and the financial highlights for the fiscal
year then ended and for the period May 1, 1998 (commencement of operations) to
August 31, 1998, in conformity with generally accepted accounting principles.
These financial statements and financial highlights (hereafter referred to as
"financial statements") are the responsibility of the Fund's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in accordance
with generally accepted auditing standards which require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits, which included confirmation of securities at August
31, 1999 by correspondence with the custodian and brokers, provide a reasonable
basis for the opinion expressed above.
Boston, Massachusetts
October 11, 1999
/s/ PricewaterhouseCoopers LLP
8 Annual Report
<PAGE>
SSgA
Special Equity Fund
Statement of Net Assets
August 31, 1999
Market
Number Value
of (000)
Shares $
------ ------
Common Stocks - 90.2%
Basic Industries - 4.2%
Smurfit-Stone Container Corp. (a) 10,000 211
Steel Dynamics, Inc. (a) 13,000 233
------
444
------
Consumer Basics - 11.5%
Biogen, Inc. (a) 4,500 345
Corn Products International, Inc. 4,000 130
IDEC Pharmaceuticals Corp. (a) 3,500 445
MedImmune, Inc. (a) 2,900 299
------
1,219
------
Consumer Durables - 3.6%
Lear Corp. (a) 3,000 121
Linens 'N Things, Inc. (a) 4,200 144
Tower Automotive, Inc. (a) 6,000 120
------
385
------
Consumer Non-Durables - 0.9%
Action Performance Companies, Inc. (a) 4,000 99
------
Consumer Services - 2.0%
Atlas Air, Inc. (a) 8,000 218
------
Energy - 10.6%
Apache Corp. 6,000 273
Barrett Resources Corp. (a) 6,000 216
Marine Drilling Co, Inc. (a) 12,000 191
Smith International, Inc. (a) 5,000 233
Union Pacific Resources Group, Inc. 12,000 215
------
1,128
------
Finance - 2.8%
First Tennessee National Corp. 4,000 128
U.S. Trust Corp. 2,000 166
------
294
------
General Business - 5.4%
Adelphia Communications Corp. (a) 4,000 249
TV Guide, Inc. Class A (a) 3,500 97
USA Networks, Inc. (a) 5,000 224
------
570
------
Miscellaneous - 1.2%
Alexandria Real Estate Equities, Inc. 4,500 132
------
Shelter - 1.6%
Southdown, Inc. 3,300 167
------
Technology - 27.9%
Alliant Techsystems, Inc. (a) 1,700 124
Conexant Systems, Inc. (a) 4,000 288
Digex, Inc. (a) 7,500 250
Exodus Communications, Inc. (a) 5,000 401
General Motors Corp. Class H (a) 3,400 175
Legato Systems, Inc. (a) 6,000 258
Micromuse, Inc. (a) 6,000 342
New Era of Networks, Inc. (a) 10,000 168
Phone.com, Inc. (a) 2,500 295
Rational Software Corp. New (a) 8,500 230
Research in Motion, Ltd. NPV (a) 5,500 164
Vitesse Semiconductor Corp. (a) 3,900 264
------
2,959
------
Transportation - 2.1%
Teekay Shipping Corp. 13,000 222
------
Annual Report 9
<PAGE>
SSgA
Special Equity Fund
Statement of Net Assets, continued
August 31, 1999
Market
Number Value
of (000)
Shares $
------ ------
Utilities - 16.4%
Allegiance Telecom, Inc. (a) 6,000 359
Globalstar Telecommunications, Ltd. (a) 10,000 255
ITC^DeltaCom, Inc. (a) 7,800 205
Teligent, Inc. Class A (a) 4,500 281
VoiceStream Wireless Corp. NPV (a) 8,000 328
Western Wireless Corp. NPV Class A (a) 8,000 310
------
1,738
------
Total Common Stocks
(cost $8,508) 9,575
------
Principal Market
Amount Value
(000) (000)
$ $
--------- ------
Short-Term Investments - 8.0%
AIM Short-Term Investment Prime Portfolio (b) 436 436
Federated Investors Prime Cash Obligations Fund (b) 420 420
------
Total Short-Term Investments
(cost $856) 856
------
Total Investments - 98.2%
(identified cost $9,364) 10,431
Other Assets and Liabilities,
Net - 1.8% 190
------
Net Assets - 100.0% 10,621
======
(a) Nonincome-producing security.
(b) At cost, which approximates market.
Abbreviations:
NPV - No Par Value
See the accompanying notes which are an integral part of the financial
statements.
10 Annual Report
<PAGE>
SSgA
Special Equity Fund
Statement of Assets and Liabilities
Amounts in thousands (except per share amount) August 31, 1999
<TABLE>
<S> <C> <C>
Assets
Investments at market (identified cost $9,364) ......................................... $ 10,431
Receivables:
Dividends ........................................................................... 5
Investments sold .................................................................... 221
Fund shares sold .................................................................... 32
Deferred organization expenses ......................................................... 1
Prepaid expenses ....................................................................... 12
Short-term investments held as collateral for securities loaned, at market ............. 2,755
--------
Total Assets ..................................................................... 13,457
Liabilities
Payables:
Investments purchased ................................................. $ 55
Accrued fees to affiliates ............................................ 9
Other accrued expenses ................................................ 17
Payable upon return of securities loaned, at market ...................... 2,755
--------
Total Liabilities ................................................................ 2,836
--------
Net Assets ............................................................................. $ 10,621
========
Net Assets Consist of:
Accumulated net realized gain (loss) ................................................... $ (2,973)
Unrealized appreciation (depreciation) on investments .................................. 1,067
Shares of beneficial interest .......................................................... 1
Additional paid-in capital ............................................................. 12,526
--------
Net Assets ............................................................................. $ 10,621
========
Net Asset Value, offering and redemption price per share:
($10,620,914 divided by 1,158,690 shares of $.001 par value
shares of beneficial interest outstanding) ....................................... $ 9.17
========
</TABLE>
See the accompanying notes which are an integral part of the financial
statements.
Annual Report 11
<PAGE>
SSgA
Special Equity Fund
Statement of Operations
Amounts in thousands For the Fiscal Year Ended August 31, 1999
<TABLE>
<S> <C> <C>
Investment Income
Dividends .................................................................. $ 143
Interest ................................................................... 20
---------
Total Investment Income ................................................. 163
Expenses
Advisory fees ................................................ $ 110
Administrative fees .......................................... 5
Custodian fees ............................................... 24
Distribution fees ............................................ 6
Transfer agent fees .......................................... 21
Professional fees ............................................ 14
Registration fees ............................................ 30
Shareholder servicing fees ................................... 5
Trustees' fees ............................................... 1
Miscellaneous ................................................ 16
---------
Expenses before reductions ................................... 232
Expense reductions ........................................... (70)
---------
Total expenses .......................................................... 162
---------
Net investment income ......................................................... 1
---------
Net Realized and Unrealized Gain (Loss)
Net realized gain (loss) on investments ....................................... (2,399)
Net change in unrealized appreciation (depreciation) on investments ........... 5,675
---------
Net realized and unrealized gain (loss) ....................................... 3,276
---------
Net increase (decrease) in net assets resulting from operations ............... $ 3,277
=========
</TABLE>
See the accompanying notes which are an integral part of the financial
statements.
12 Annual Report
<PAGE>
SSgA
Special Equity Fund
Statement of Changes in Net Assets
Amounts in thousands For the Fiscal Years Ended August 31,
<TABLE>
<CAPTION>
1999 1998*
---------- ----------
<S> <C> <C>
Increase (Decrease) in Net Assets
Operations
Net investment income ................................................ $ 1 $ 14
Net realized gain (loss) ............................................. (2,399) (574)
Net change in unrealized appreciation (depreciation) ................. 5,675 (4,608)
---------- ----------
Net increase (decrease) in net assets resulting from operations ... 3,277 (5,168)
---------- ----------
Distributions
From net investment income ........................................... (15) --
In excess of net investment income ................................... (3) --
---------- ----------
Net decrease from distributions ................................... (18) --
---------- ----------
Share Transactions
Net increase (decrease) in net assets from share transactions ........ (5,784) 18,314
---------- ----------
Total Net Increase (Decrease) in Net Assets ............................. (2,525) 13,146
Net Assets
Beginning of period .................................................. 13,146 --
---------- ----------
End of period (including undistributed net investment income of
$14 at August 31, 1998) ........................................... $ 10,621 $ 13,146
========== ==========
</TABLE>
* For the period May 1, 1998 (commencement of operations) to August 31, 1998.
See the accompanying notes which are an integral part of the financial
statements.
Annual Report 13
<PAGE>
SSgA
Special Equity Fund
Financial Highlights
The following table includes selected data for a share outstanding throughout
each period and other performance information derived from the financial
statements.
Fiscal Years Ended
August 31,
------------------------
1999 1998*
---------- ----------
Net Asset Value, Beginning of Period ............... $ 7.17 $ 10.00
---------- ----------
Income From Operations
Net investment income (a) ....................... -- .01
Net realized and unrealized gain (loss) ......... 2.01 (2.84)
---------- ----------
Total Income From Operations ................. 2.01 (2.83)
---------- ----------
Distributions
From net investment income ...................... (.01) --
---------- ----------
Net Asset Value, End of Period ..................... $ 9.17 $ 7.17
========== ==========
Total Return (%)(b) ................................ 28.06 (28.30)
Ratios/Supplemental Data:
Net Assets, end of period ($ in thousands) ...... 10,621 13,146
Ratios to average net assets (%)(c):
Operating expenses, net (d) .................. 1.10 1.10
Operating expenses, gross (d) ................ 1.57 1.55
Net investment income ........................ .01 .24
Portfolio turnover rate (%)(c) .................. 211.30 88.36
* For the period May 1, 1998 (commencement of operations) to August 31,
1998.
(a) For the period subsequent to August 31, 1998, average month-end shares
outstanding were used for this calculation.
(b) Periods less than one year are not annualized.
(c) The ratios for the period ended August 31, 1998 are annualized.
(d) See Note 4 for current period amounts.
14 Annual Report
<PAGE>
SSgA
Special Equity Fund
Notes to Financial Statements
August 31, 1999
1. Organization
The SSgA Funds (the "Investment Company") is a series mutual fund,
currently comprised of 23 investment portfolios which are in operation as
of August 31, 1999. These financial statements report on one portfolio,
the SSgA Special Equity Fund (the "Fund"). The Investment Company is a
registered and diversified open-end investment company, as defined in the
Investment Company Act of 1940, as amended (the "1940 Act"), that was
organized as a Massachusetts business trust on October 3, 1987 and
operates under a First Amended and Restated Master Trust Agreement, dated
October 13, 1993, as amended (the "Agreement"). The Investment Company's
Agreement permits the Board of Trustees to issue an unlimited number of
full and fractional shares of beneficial interest at a $.001 par value.
2. Significant Accounting Policies
The Fund's financial statements are prepared in accordance with generally
accepted accounting principles which require the use of management
estimates. The following is a summary of the significant accounting
policies consistently followed by the Fund in the preparation of its
financial statements.
Security valuation: United States equity securities listed and traded
principally on any national securities exchange are valued on the basis of
the last sale price or, lacking any sale, at the closing bid price, on the
primary exchange on which the security is traded. United States
over-the-counter equities are valued on the basis of the closing bid
price.
International securities traded on a national securities exchange are
valued on the basis of the last sale price. International securities
traded over the counter are valued on the basis of the mean of bid prices.
In the absence of a last sale or mean bid price, respectively, such
securities may be valued on the basis of prices provided by a pricing
service if those prices are believed to reflect the market value of such
securities.
Money market instruments maturing within 60 days of the valuation date are
valued at amortized cost, a method by which each portfolio instrument is
initially valued at cost, and thereafter a constant accretion/amortization
to maturity of any discount or premium is assumed, unless the Board of
Trustees determines that amortized cost does not represent fair value.
The Fund may value securities for which market quotations are not readily
available at "fair value," as determined in good faith pursuant to
procedures established by the Board of Trustees.
Securities transactions: Securities transactions are recorded on a trade
date basis. Realized gains and losses from securities transactions are
recorded on the basis of identified cost.
Investment income: Dividend income is recorded on the ex-dividend date and
interest income is recorded on the accrual basis.
Amortization and accretion: All zero-coupon bond discounts and original
issue discounts are accreted for both tax and financial reporting
purposes. All short- and long-term market premiums/discounts are
amortized/accreted for both tax and financial reporting purposes.
Annual Report 15
<PAGE>
SSgA
Special Equity Fund
Notes to Financial Statements, continued
August 31, 1999
Federal income taxes: Since the Investment Company is a Massachusetts
business trust, each fund is a separate corporate taxpayer and determines
its net investment income and capital gains (or losses) and the amounts to
be distributed to each fund's shareholders without regard to the income
and capital gains (or losses) of the other funds.
It is the Fund's intention to qualify as a regulated investment company,
as defined by the Internal Revenue Code of 1986, as amended. This requires
the Fund to distribute all of its taxable income. Therefore, the Fund paid
no federal income taxes and no federal income tax provision was required.
At August 31, 1999, the Fund had a net tax basis capital loss carryover of
$1,172,352 which may be applied against any realized net taxable gains in
each succeeding year or until its expiration date of August 31, 2007. As
permitted by tax regulations, the Fund intends to defer a net realized
capital loss of $1,719,108 incurred from November 1, 1998 to August 31,
1999, and treat it as arising in fiscal year 2000.
The Fund's aggregate cost of investments and the composition of unrealized
appreciation and depreciation of investment securities for federal income
tax purposes as of August 31, 1999 are as follows:
Net
Unrealized
Federal Tax Unrealized Unrealized Appreciation
Cost Appreciation (Depreciation) (Depreciation)
----------- ------------ ------------- --------------
$ 9,445,737 $ 1,684,009 $ (698,912) $ 985,097
Dividends and distributions to shareholders: Income dividends and capital
gain distributions, if any, are recorded on the ex-dividend date.
Dividends are generally declared and paid quarterly. Capital gain
distributions are generally declared and paid annually. An additional
distribution may be paid by the Fund to avoid imposition of federal income
tax on any remaining undistributed net investment income and capital
gains.
The timing and characterization of certain income and capital gain
distributions are determined in accordance with federal tax regulations
which may differ from generally accepted accounting principles ("GAAP").
As a result, net investment income and net realized gain (or loss) on
investment transactions for a reporting period may differ significantly
from distributions during such period. The differences between tax
regulations and GAAP relate primarily to certain securities sold at a
loss. Accordingly, the Fund may periodically make reclassifications among
certain of its capital accounts without impacting its net asset value.
Expenses: Most expenses can be directly attributed to the Fund. Expenses
which cannot be directly attributed are allocated among all funds based
principally on their relative net assets.
3. Securities Transactions
Investment transactions: For the year ended August 31, 1999, purchases and
sales of investment securities, excluding short-term investments and
futures contracts, aggregated to $29,846,346 and $36,494,578,
respectively.
Securities Lending: Effective December 17, 1998, the Investment Company
started its securities lending program. The program allows each Fund to
loan securities with a value up to 33 1/3% of its total assets to certain
brokers. The Fund receives cash (U.S. currency), U.S. Government or U.S.
Government agency obligations as collateral against the loaned securities.
To the extent that a loan is secured by cash collateral, such collateral
shall
16 Annual Report
<PAGE>
SSgA
Special Equity Fund
Notes to Financial Statements, continued
August 31, 1999
be invested by State Street Bank and Trust Company in short-term
instruments, money market mutual funds, and such other short-term
investments, provided the investments meet certain quality and
diversification requirements. Under the securities lending arrangement,
the collateral received is recorded on the Fund's statement of assets and
liabilities along with the related obligation to return the collateral. In
those situations where the Company has relinquished control of securities
transferred, it derecognizes the securities and records a receivable from
the counterparty.
Income generated from the investment of cash collateral, less negotiated
rebate fees paid to participating brokers and transaction costs, is
divided between the Fund and State Street Bank and Trust Company and is
recorded as interest income for the Fund. To the extent that a loan is
secured by non-cash collateral, brokers pay the Fund negotiated lenders'
fees, which are divided between the Fund and State Street Bank and Trust
Company and are recorded as interest income for the Fund. All collateral
received will be in an amount at least equal to 102% (for loans of U.S.
securities) or 105% (for non-U.S. securities) of the market value of the
loaned securities at the inception of each loan. Should the borrower of
the securities fail financially, there is a risk of delay in recovery of
the securities or loss of rights in the collateral. Consequently, loans
are made only to borrowers which are deemed to be of good financial
standing. As of August 31, 1999, the value of outstanding securities on
loan and the value of collateral amounted to $2,654,954 and $2,755,022,
respectively. The Fund recorded securities lending income of $8,502 during
the year.
4. Related Parties
Adviser: The Investment Company has an investment advisory agreement with
State Street Bank and Trust Company under which the Adviser directs the
investments of the Fund in accordance with its investment objectives,
policies, and limitations. For these services, the Fund pays a fee to the
Adviser calculated daily and paid monthly, at an annual rate of .75% of
its average daily net assets. The Adviser voluntarily agreed to reimburse
the Fund for all expenses in excess of 1.10% of average daily net assets
on an annual basis. As of August 31, 1999, the receivable due from the
Adviser for expenses in excess of the expense cap has been netted against
the Advisory fee payable. The Investment Company also has contracts with
the Adviser to provide custody, shareholder servicing and transfer agent
services to the Fund. These amounts are presented in the accompanying
Statement of Operations.
In addition, the Fund has entered into arrangements with its Adviser
whereby credits realized as a result of uninvested cash balances were used
to reduce a portion of the Fund's expenses. During the period, the Fund's
custodian fees were reduced by $1,083 under these arrangements.
Administrator: The Investment Company has an administration agreement with
Frank Russell Investment Management Company (the "Administrator"), a
wholly owned subsidiary of The Northwestern Mutual Life Insurance Company,
under which the Administrator supervises all non-portfolio investment
aspects of the Investment Company's operations and provides adequate
office space and all necessary office equipment and services, including
telephone service, utilities, stationery supplies, and similar items. The
Investment Company pays the Administrator the following fees for services
supplied by the Administrator pursuant to the Administration Agreement:
(i) an annual fee, payable monthly on a pro rata basis, based on the
following percentages of the combined average daily net assets of all
domestic funds: $0 up to and including $500 million - .06%; over $500
million to and including $1 billion - .05%; over $1 billion - .03%, and
(ii) less an amount equal to
Annual Report 17
<PAGE>
SSgA
Special Equity Fund
Notes to Financial Statements, continued
August 31, 1999
the sum of certain distribution-related expenses incurred by the
Investment Company's Distributor on behalf of the Fund (up to a maximum of
5% for the period May 1, 1998 to December 31, 1998, and 0% thereafter, of
the asset-based fee determined in (i)). In addition, the Fund reimburses
the Administrator for out-of-pocket expenses and start-up costs for new
funds.
Distributor and Shareholder Servicing: The Investment Company has a
Distribution Agreement with Russell Fund Distributors (the "Distributor")
which is a wholly-owned subsidiary of the Administrator to promote and
offer shares of the Investment Company. The Distributor may enter into
sub-distribution agreements with other non-related parties. The amounts
paid to the Distributor are included in the accompanying Statement of
Operations.
The Investment Company has a Distribution Plan pursuant to Rule 12b-1 (the
"Plan") under the 1940 Act. Under this Plan, the Investment Company is
authorized to make payments to the Distributor, or any Shareholder
Servicing Agent, as defined in the Plan, for providing distribution and
marketing services, for furnishing assistance to investors on an ongoing
basis, and for the reimbursement of direct out-of-pocket expenses charged
by the Distributor in connection with the distribution and marketing of
shares of the Investment Company and the servicing of investor accounts.
The Fund has service agreements with the Adviser, State Street Brokerage
Services, Inc. ("SSBSI"), a wholly-owned subsidiary of the Adviser, the
Adviser's Retirement Investment Services Division ("RIS"), the Adviser's
Metropolitan Division of Commercial Banking ("Commercial Banking") and
State Street Solutions ("Solutions")(collectively the "Agents"), as well
as several unaffiliated service providers. For these services, the Fund
pays .025%, .175%, .175%, .175% and .175% to the Adviser, SSBSI, RIS,
Commercial Banking, and Solutions, respectively, based upon the average
daily value of all Fund shares held by or for customers of these Agents.
For the year ended August 31, 1999, the Fund was charged shareholder
servicing expenses of $3,672, $147 and $848 by the Adviser, SSBSI and
Commercial Banking, respectively. The Fund did not incur any expenses from
RIS and Solutions during this period.
The combined distribution and shareholder servicing payments shall not
exceed .25% of the average daily value of net assets on an annual basis.
The shareholder servicing payments shall not exceed .20% of the average
daily value of net assets on an annual basis. Any payments that exceed the
maximum amount of allowable reimbursement may be carried forward for two
years following the year in which the expenditure was incurred so long as
the plan is in effect. The Fund's responsibility for any such expenses
carried forward shall terminate at the end of two years following the year
in which the expenditure was incurred. The Trustees or a majority of the
Fund's shareholders have the right, however, to terminate the Distribution
Plan and all payments thereunder at any time. The Fund will not be
obligated to reimburse the Distributor for carryover expenses subsequent
to the Distribution Plan's termination or noncontinuance. There were no
carryover expenses as of August 31, 1999.
Affiliated Brokerage: The Fund placed a portion of its portfolio
transactions with SSBSI, an affiliated broker dealer of the Fund's
Adviser. The commissions paid to SSBSI were $1,250 for the period ended
August 31, 1999.
Board of Trustees: Through May 31, 1999, the Investment Company paid each
Trustee not affiliated with the Investment Company a retainer of $48,000
annually, $1,500 for each board meeting attended, an additional $1,500
18 Annual Report
<PAGE>
SSgA
Special Equity Fund
Notes to Financial Statements, continued
August 31, 1999
for attending the annual audit committee meeting, and reimbursement for
out-of-pocket expenses. As of June 1, 1999, each Trustee receives $2,500
for each board meeting attended, an additional $2,500 for attending the
annual audit committee meeting and $2,500 for the valuation committee fee
in addition to the $48,000 annual retainer. These expenses are allocated
among all of the Funds based upon their relative net assets.
Accrued fees payable to affiliates and trustees as of August 31, 1999 were
as follows:
Advisory fees $ 5,151
Administration fees 360
Custodian fees 925
Distribution fees 484
Shareholder servicing fees 554
Transfer agent fees 1,182
Trustees' fees 496
--------
$ 9,152
========
Beneficial Interest: As of August 31, 1999, one shareholder (who was also
an affiliate of the Investment Company) was a record owner of
approximately 16% of the total outstanding shares of the Fund.
5. Fund Share Transactions (amounts in thousands)
<TABLE>
<CAPTION>
For the Period May 1, 1998
Fiscal Year Ended (Commencement of Operations)
August 31, 1999 to August 31, 1998
------------------------ ------------------------
Shares Dollars Shares Dollars
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Proceeds from shares sold ...................... 1,173 $ 10,190 1,833 $ 18,319
Proceeds from reinvestment of distributions .... 2 17 -- --
Payments for shares redeemed ................... (1,849) (15,991) (1) (5)
---------- ---------- ---------- ----------
Total net increase (decrease) .................. (674) $ (5,784) 1,832 $ 18,314
========== ========== ========== ==========
</TABLE>
6. Line of Credit
The Fund and several affiliated Funds (the "Participants") share in a $50
million revolving credit facility for temporary or emergency purposes,
including the meeting of redemption requests that otherwise might require
the untimely disposition of securities. The Participants are charged an
annual commitment fee of .09% (.065% prior to July 15, 1999) on the
average daily unused amount of the aggregate commitment, which is
allocated among each of the Participants. Interest, at the Federal Fund
Rate plus .50% annually, is calculated based on the market rates at the
time of the borrowing. The Fund may borrow up to a maximum of 33 1/3
percent of the value of it's net assets under the agreement. The Fund did
not have any drawdowns during the year.
Annual Report 19
<PAGE>
SSgA Special Equity Fund
One International Place, 27th Floor
Boston, Massachusetts 02110
(800) 997-7327
- --------------------------------------------------------------------------------
Trustees
Lynn L. Anderson, Chairman
William L. Marshall
Steven J. Mastrovich
Patrick J. Riley
Richard D. Shirk
Bruce D. Taber
Henry W. Todd
Officers
Lynn L. Anderson, President, Treasurer and CEO
Mark E. Swanson, Assistant Secretary, Assistant
Treasurer and Principal Accounting Officer
J. David Griswold, Vice President and Secretary
Deedra S. Walkey, Assistant Secretary
Rick J. Chase, Assistant Secretary
Carla L. Anderson, Assistant Secretary
Investment Adviser
State Street Bank and Trust Company
225 Franklin Street
Boston, Massachusetts 02110
Custodian, Transfer Agent and
Office of Shareholder Inquiries
State Street Bank and Trust Company
1776 Heritage Drive
North Quincy, Massachusetts 02171
(800) 647-7327
Distributor
Russell Fund Distributors, Inc.
One International Place, 27th Floor
Boston, Massachusetts 02110
(800) 997-7327
Administrator
Frank Russell Investment Management Company
909 A Street
Tacoma, Washington 98402
Legal Counsel
Goodwin, Procter & Hoar LLP
Exchange Place
Boston, Massachusetts 02109
Independent Accountants
PricewaterhouseCoopers LLP
160 Federal Street
Boston, Massachusetts 02110
20 Annual Report
<PAGE>
SSgA(R) Funds
Aggressive Equity Fund
Annual Report
August 31, 1999
Table of Contents
Page
Chairman's Letter...................................................4
Portfolio Management Discussion and Analysis........................6
Report of Independent Accountants...................................8
Financial Statements................................................9
Financial Highlights...............................................14
Notes to Financial Statements......................................15
Fund Management and Service Providers..............................20
"SSgA(R)" is a registered trademark of State Street Corporation and is licensed
for use by the SSgA Funds.
This report is prepared from the books and records of the Fund and it is
submitted for the general information of shareholders. This information is for
distribution to prospective investors only when preceded or accompanied by a
SSgA Funds Prospectus containing more complete information concerning the
investment objective and operations of the Fund, charges and expenses. The
Prospectus should be read carefully before an investment is made.
Performance is historical and assumes reinvestment of all dividends and capital
gains. Investment return and principal value will fluctuate so that an
investor's shares, when redeemed, may be worth more or less than when purchased.
Past performance is not indicative of future results. International markets
entail different risks than those typically associated with domestic markets,
including currency fluctuations, political and economic instability, accounting
changes and foreign taxation. Securities may be less liquid and more volatile.
Please see the Prospectus for further details. Russell Fund Distributors, Inc.,
is the distributor of the SSgA Funds.
<PAGE>
SSgA Aggressive Equity Fund
- --------------------------------------------------------------------------------
Letter From the Chairman of State Street Global Advisors
- --------------------------------------------------------------------------------
Dear Shareholders,
It is my pleasure to provide you with the SSgA Funds annual report for the
fiscal year ended August 31, 1999. The SSgA Fund family has grown to include
twenty-three portfolios covering a broad range of investment strategies. The
enclosed information provides an overview of the investment process for the SSgA
Aggressive Equity Fund. This overview contains market updates, performance, and
financial information for the Fund. I hope you will find this information a
useful reference as you review your investment strategy.
During the past fiscal year, the SSgA Fund family has opened two new Funds. The
names and investment objectives for these funds are as follows:
The SSgA Aggressive Equity Fund seeks to maximize total return through investing
in US equity securities that are undervalued relative to their growth potential
as measured by SSgA's proprietary models.
The SSgA IAM Shares Fund seeks to maximize total return by investing primarily
in equity securities of companies that have entered into collective bargaining
agreements with the International Association of Machinists and Aerospace
Workers or affiliated labor unions.
Additionally, three SSgA Funds achieved a five-year track record during the 1999
fiscal year. These funds include the two institutional money market funds, SSgA
US Treasury and SSgA Prime Money Market Funds and the SSgA Emerging Markets
Fund. We are proud of our long-term record and look forward to having additional
funds complete their five-year anniversary.
In today's complex global marketplace, we are continually researching new
products and ideas to introduce to our fund family. Here at SSgA, we are
committed to providing a wide range of competitive investment vehicles to
fulfill your investment needs.
I would like to thank you for choosing the SSgA Funds.
Sincerely,
/s/ Nicholas A. Lopardo
Nicholas A. Lopardo
State Street Global Advisors
Chairman and Chief Executive Officer
4 Annual Report
<PAGE>
SSgA Aggressive Equity Fund
- --------------------------------------------------------------------------------
Management of the Fund
- --------------------------------------------------------------------------------
[PHOTO]
Nicholas A. Lopardo
Chairman and Chief Executive Officer
A Team Approach to Investment Management
Our investment strategies are the product of the combined experience of our
professional staff. Portfolio Managers work together to develop and enhance the
techniques that drive our investment processes. As a result, the portfolios we
manage benefit from the knowledge of the entire team.
Mr. Richard B. Weed, CFA, Principal, is the portfolio manager primarily
responsible for investment decisions regarding the Aggressive Equity Fund. Mr.
Weed joined SSgA in November 1995. His responsibilities include research,
product development, and portfolio management for the US Active strategy. Mr.
Weed joined State Street in March 1994. He holds an MS in Finance and Accounting
from the MIT Sloan School of Management, and has an MS in Chemical Engineering
from Northeastern University, and a BS in Chemical Engineering from Worcester
Polytechnic Institute. Mr. Weed is a member of the Boston Security Analysts
Society and AIMR. There are seven other portfolio managers who assist Mr. Weed
in managing the Fund.
Annual Report 5
<PAGE>
SSgA Aggressive Equity Fund
- --------------------------------------------------------------------------------
Portfolio Management Discussion and Analysis
- --------------------------------------------------------------------------------
Objective: Provide total returns that exceed over time the Russell 2500[TM]
Growth Index.
Invests in: US equity securities.
Strategy: The Fund management team uses a quantitative approach to investment
management, designed to uncover equity securities which are undervalued, with
superior growth potential. This quantitative investment approach involves a
modeling process to evaluate vast amounts of financial data and corporate
earnings forecasts. This structured and disciplined approach seeks to provide
long-term total returns in excess of the Russell 2500(TM) Growth Index through
strong bottom-up stock selection.
- --------------------------------------------------------------------------------
GROWTH OF A $10,000 INVESTMENT
Dates Aggressive Equity Fund Russell 2500(TM) Growth Index**
Inception* $10,000 $10,000
1999 $12,730 $11,077
================================================================================
Performance Review
From its inception on December 30, 1998, through August 31, 1999, the SSgA
Aggressive Equity Fund had a total return of 27.30%, as compared to the Russell
2500(TM) Growth Index gain of 10.77% for the same period. The Fund's performance
is net of operating expenses, whereas Index results do not include expenses of
any kind. The Fund has done well since its inception primarily due to strong
stock selection. After generating solid first quarter performance, Fund returns
dropped slightly in the second quarter but rebounded in July and August. In
particular, stock selection was consistently effective in the Consumer Cyclicals
(Intimate Brands, Musicland Stores) and Health Care (Amgen, Biogen, Priority
Healthcare) sectors. Selection in the Technology (underweight Qualcomm,
overweight Network Solutions) and Financial (underweight E-Trade, overweight
Ameritrade Holdings) sectors resulted in some degree of underperformance in the
second quarter, however, Technology was strong again in August.
- --------------------------------------------------------------------------------
SSgA Aggressive Equity Fund
- --------------------------------------------------------------------------------
Period Ended Growth of Total
08/31/99 $10,000 Return
- ------------ ----------- ------
Inception $ 12,730 27.30%
- --------------------------------------------------------------------------------
Russell 2500(TM) Growth Index
- --------------------------------------------------------------------------------
Period Ended Growth of Total
08/31/99 $10,000 Return
- ------------ ----------- ------
Inception $ 11,077 10.77%
See related Notes on following page.
6 Annual Report
<PAGE>
SSgA Aggressive Equity Fund
- --------------------------------------------------------------------------------
Portfolio Management Discussion and Analysis
- --------------------------------------------------------------------------------
The investment process employed by the Fund emphasizes quantitative modeling,
which implements an integrated growth and value bottom-up stock selection method
designed to outperform the benchmark index over the long-term. While risk
controls are used in portfolio construction, the Fund does take controlled
positions that deviate from the benchmark in those industries with fair
valuations and strong long-term growth prospects. Because value is an integral
component of the investment process, the Fund will not be overweighted in stocks
in which the Manager views to be excessively expensive.
As the Fund's investment process is disciplined and driven from the bottom-up,
overall strategy and approach does not deviate during times of underperformance
or market volatility. The Fund avoids responding suddenly to the current
investment environment through sector timing or top-down thematic investing. It
is this unwavering investment philosophy that seeks to add long-term value
versus the benchmark. When, in unusually volatile short-term periods, Fund
performance lags the benchmark due to the very nature the process, it is this
strong discipline that allows a consistent focus on meeting long-term
objectives.
Market and Portfolio Highlights
For the eight months ended August 31, 1999, the US equity market experienced
periods of dramatic volatility and lack of breadth, although this subsided
somewhat in the May August time period. As issues surrounding the financial
industry including Russian devaluation, Asian crisis, Long Term Capital
Management, subsided late in 1998, the market entered an unusual period as
investors flocked to the Internet phenomenon. It appeared that investors shunned
established financial principles and bought into the most overvalued securities
available - Internet stocks with virtually no earnings and very low future
prospects for profit. This turned out to be a short-term anomaly, and Internet
stock prices dropped substantially in the second quarter as valuation once again
returned to favor. The Fund's modest exposure to Internet issues was detrimental
to first quarter 1999 performance, however, it was advantageous relative to
second quarter results. The US market continues to be strong, although it is not
at the levels we've become used to over the last several years. The Dow
Industrials have hovered around the 11,000 mark since April and have a
year-to-date return of 19.23%, while broader US equity benchmarks such as the
S&P 500(R) Index have returned just over 8% in the same period.
At August 31, 1999, the SSgA Aggressive Equity Fund held 51 stocks with market
capitalization ranging from $263 million to $216 billion, resulting in an
average weighted market capitalization of $22.6 billion. As the Fund's objective
is achieved through stock selection with a disciplined investment approach, the
portfolio is fully invested at all times.
- --------------------------------------------------------------------------------
Top Ten Equity Holdings
(as a percent of Total Investments) August 31, 1999
- --------------------------------------------------------------------------------
Calpine Corp. 3.2%
Amgen, Inc. 3.0
Roberts Pharmaceutical Corp. 2.8
Texas Instruments, Inc. 2.8
Apache Corp. 2.7
Applied Materials, Inc. 2.6
Xilinx, Inc. 2.6
Tandy Corp. 2.6
Biogen, Inc. 2.5
Genzyme Corp. 2.5
- --------------------------------------------------------------------------------
--------------------
Notes: The following notes relate to the Growth of $10,000 graph and table on
the preceding page.
* The Fund commenced operations on December 30, 1998. Index comparison also
began December 30, 1998.
** The Russell 2500(TM) Growth Index represents the performance of small and
mid-cap companies in the US. These 2500 companies represent the small end
of the Russell 3000(R) Index, and about 23% of the total capitalization of
the Russell 3000 Index.
+ Total return reflects performance for the period December 30, 1998 to
August 31, 1999.
Performance is historical and assumes reinvestment of all dividends and capital
gains. Investment return and principal value will fluctuate so that an
investor's shares, when redeemed, may be worth more or less than when purchased.
Past performance is not indicative of future results.
Annual Report 7
<PAGE>
Report of Independent Accountants
To the Shareholders and Board of Trustees of the SSgA Funds:
In our opinion, the accompanying statement of assets and liabilities and
statement of net assets, and the related statements of operations and of changes
in net assets and the financial highlights present fairly, in all material
respects, the financial position of SSgA Aggressive Equity Fund (the "Fund") at
August 31, 1999, the results of its operations, the changes in its net assets,
and the financial highlights for the period December 30, 1998 (commencement of
operations) to August 31, 1999, in conformity with generally accepted accounting
principles. These financial statements and financial highlights (hereafter
referred to as "financial statements") are the responsibility of the Fund's
management; our responsibility is to express an opinion on these financial
statements based on our audit. We conducted our audit of these financial
statements in accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audit, which included
confirmation of securities at August 31, 1999 by correspondence with the
custodian and brokers, provides a reasonable basis for the opinion expressed
above.
Boston, Massachusetts
October 11, 1999
/s/ Pricewaterhousecoopers LLP
8 Annual Report
<PAGE>
SSgA
Aggressive Equity Fund
Statement of Net Assets
August 31, 1999
Principal Market
Amount Value
(000) (000)
$ $
--------- ------
Common Stocks - 97.7%
Basic Industries - 1.6%
Spartech Corp. 4,100 114
-----
Consumer Basics - 22.5%
AmeriSource Health Corp.
Class A (a) 5,800 150
Amgen, Inc. (a) 2,500 208
Apria Healthcare Group, Inc. (a) 8,400 142
Biogen, Inc. (a) 2,300 176
Dean Foods Co. 3,800 153
Genzyme Corp. (a) 3,100 175
IDEC Pharmaceuticals Corp. (a) 1,000 127
Quest Diagnostics, Inc. (a) 5,700 151
Roberts Pharmaceutical Corp. (a) 7,400 198
Safeway, Inc. (a) 2,900 135
-----
1,615
-----
Consumer Durables - 1.4%
Best Buy Co. (a) 1,500 105
-----
Consumer Non-Durables - 11.8%
Federated Department Stores,
Inc. (a) 3,400 156
Home Depot, Inc. (The) 2,400 147
Musicland Stores Corp. (a) 15,300 130
Shaw Industries, Inc. 7,600 152
TJX Cos., Inc. 4,300 124
Zale Corp. (a) 3,900 136
-----
845
-----
Consumer Services - 2.4%
Darden Restaurants, Inc 3,000 47
Harrah's Entertainment, Inc. (a) 5,700 128
-----
175
-----
Energy - 4.3%
Apache Corp. 4,100 187
Barrett Resources Corp. (a) 3,500 126
-----
313
Finance - 5.5%
Edwards (A.G.), Inc. 5,200 131
Equitable Cos., Inc. 2,500 154
UnionBanCal Corp. 2,900 111
-----
396
-----
General Business - 4.1%
Valassis Communications, Inc. (a) 3,600 158
Viad Corp. 4,500 135
-----
293
-----
Shelter - 1.3%
NVR, Inc. (a) 1,600 92
-----
Technology - 36.8%
America Online, Inc. (a) 1,100 100
American Management Systems,
Inc. (a) 4,100 117
Apple Computer, Inc. (a) 2,400 156
Applied Materials, Inc. (a) 2,600 185
Avant! Corp. 10,000 140
BMC Industries, Inc. (a) 12,000 148
Cisco Systems, Inc. (a) 2,100 142
Computer Associates International,
Inc. 2,000 113
Dell Computer Corp. (a) 3,100 151
EMC Corp. (a) 2,500 150
Ingram Micro, Inc. Class A (a) 4,900 124
Lexmark International Group, Inc.
Class A (a) 1,400 110
Network Solutions, Inc. Class A (a) 1,900 109
Annual Report 9
<PAGE>
SSgA
Aggressive Equity Fund
Statement of Net Assets, continued
August 31, 1999
Principal Market
Amount Value
(000) (000)
$ $
--------- ------
Structural Dynamics Research Corp. (a) 5,800 92
Sybase, Inc. (a) 12,000 150
Tandy Corp. 3,800 180
Texas Instruments, Inc. 2,400 197
Xilinx, Inc. (a) 2,600 182
Xircom, Inc. (a) 2,500 100
-----
2,646
-----
Utilities - 6.0%
Calpine Corp. (a) 2,500 227
CenturyTel, Inc. 2,850 111
Dycom Industries, Inc. (a) 2,900 90
-----
428
-----
Total Common Stocks
(cost $6,670) 7,022
-----
Short-Term Investments - 0.1%
Federated Investors Prime Cash
Obligations Fund (b) 8 8
-----
Total Short-Term Investments
(cost $8) 8
-----
Total Investments - 97.8%
(identified cost $6,678) 7,030
Other Assets and Liabilities,
Net - 2.2% 155
-----
Net Assets - 100.0% 7,185
=====
(a) Nonincome-producing security.
(b) At cost, which approximates market.
See the accompanying notes which are an integral part of the financial
statements.
10 Annual Report
<PAGE>
SSgA
Aggressive Equity Fund
Statement of Assets and Liabilities
Amounts in thousands (except per share amount) August 31, 1999
Assets
Investments at market (identified cost $6,678) ............... $ 7,030
Receivables:
Dividends .................................................. 1
Investments sold ........................................... 1,019
Fund shares sold ........................................... 12
From Adviser ............................................... 11
Prepaid expenses ............................................. 12
--------
Total Assets ............................................. 8,085
Liabilities
Payables:
Investments purchased ............................ $ 873
Fund shares redeemed ............................. 22
Accrued fees to affiliates ....................... 1
Other accrued expenses ........................... 4
-------
Total Liabilities ........................................ 900
--------
Net Assets ................................................... $ 7,185
========
Net Assets Consist of:
Undistributed net investment income .......................... $ 10
Accumulated net realized gain (loss) ......................... 1,384
Unrealized appreciation (depreciation) on investments ........ 352
Shares of beneficial interest ................................ 1
Additional paid-in capital ................................... 5,438
--------
Net Assets ................................................... $ 7,185
========
Net Asset Value, offering and redemption price per share:
($7,184,638 divided by 564,232 shares of $.001 par value
shares of beneficial interest outstanding) ............... $ 12.73
========
See the accompanying notes which are an integral part of the financial
statements.
Annual Report 11
<PAGE>
SSgA
Aggressive Equity Fund
Statement of Operations
Amounts in Thousands For the Period December 30, 1998
(Commencement of Operations) to August 31, 1999
Investment Income
Dividends .................................................. $ 19
Interest ................................................... 8
-------
Total Investment Income ................................. 27
Expenses
Advisory fees ................................... $ 34
Administrative fees ............................. 1
Custodian fees .................................. 8
Distribution fees ............................... 1
Transfer agent fees ............................. 10
Professional fees ............................... 11
Registration fees ............................... 26
Trustees' fees .................................. 1
Miscellaneous ................................... 2
----
Expenses before reductions ...................... 94
Expense reductions .............................. (44)
----
Expenses, net ............................................ 50
-------
Net investment loss .......................................... (23)
-------
Net Realized and Unrealized Gain (Loss)
Net realized gain (loss) on investments ...................... 1,384
Net change in unrealized appreciation
(depreciation) on investments .............................. 352
-------
Net realized and unrealized gain (loss) ...................... 1,736
-------
Net increase (decrease) in net assets
resulting from operations .................................. $ 1,713
=======
See the accompanying notes which are an integral part of the financial
statements.
12 Annual Report
<PAGE>
SSgA
Aggressive Equity Fund
Statement of Changes in Net Assets
Amounts in Thousands
1999*
----------
Increase (Decrease) in Net Assets
Operations
Net investment loss ......................................... $ (23)
Net realized gain (loss) .................................... 1,384
Net change in unrealized appreciation
(depreciation) ............................................ 352
----------
Net increase (decrease) in net assets resulting
from operations ........................................ 1,713
----------
Share Transactions
Net increase (decrease) in net assets from share
transactions .............................................. 5,472
----------
Total Net Increase (Decrease) in Net Assets ................... 7,185
Net Assets
Beginning of period --
----------
End of period (including undistributed net
investment income of $10) ................................. $ 7,185
==========
* For the period December 30, 1998 (commencement of operations) to August
31, 1999.
See the accompanying notes which are an integral part of the financial
statements.
Annual Report 13
<PAGE>
SSgA
Aggressive Equity Fund
Financial Highlights
The following tables includes selected data for a share outstanding througout
the period and other performance information derived from the financial
statements.
1999*
-----
Net Asset Value, Beginning of Period ......................... $ 10.00
---------
Income From Operations
Net investment loss (a) .................................... (.04)
Net realized and unrealized gain (loss) .................... 2.77
---------
Total Income From Operations ............................. 2.73
---------
Net Asset Value, End of Period ............................... $ 12.73
=========
Total Return (%)(b) .......................................... 27.30
Ratios/Supplemental Data:
Net Assets, end of period ($ in thousands) ................. 7,185
Ratios to average net assets (%)(c):
Operating expenses, net (d) .............................. 1.10
Operating expenses, gross (d) ............................ 2.07
Net investment loss ...................................... (.50)
Portfolio turnover rate (%)(b) ............................. 179.56
* For the period December 30, 1998 (commencement of operations) to August
31, 1999.
(a) Average month-end shares outstanding were used for this calculation.
(b) Periods less than one year are not annualized.
(c) The ratios for the period ended August 31, 1999 are annualized.
(d) See Note 4 for current period amounts.
14 Annual Report
<PAGE>
SSgA
Aggressive Equity Fund
Notes to Financial Statements
August 31, 1999
1. Organization
The SSgA Funds (the "Investment Company") is a series mutual fund,
currently comprised of 23 investment portfolios which are in operation as
of August 31, 1999. These financial statements report on one portfolio,
the SSgA Aggressive Equity Fund (the "Fund"). The Investment Company is a
registered and diversified open-end investment company, as defined in the
Investment Company Act of 1940, as amended (the "1940 Act"), that was
organized as a Massachusetts business trust on October 3, 1987 and
operates under a First Amended and Restated Master Trust Agreement, dated
October 13, 1993, as amended (the "Agreement"). The Investment Company's
Agreement permits the Board of Trustees to issue an unlimited number of
full and fractional shares of beneficial interest at a $.001 par value.
2. Significant Accounting Policies
The Fund's financial statements are prepared in accordance with generally
accepted accounting principles which require the use of management
estimates. The following is a summary of the significant accounting
policies followed by the Fund in the preparation of its financial
statements.
Security valuation: United States equity securities listed and traded
principally on any national securities exchange are valued on the basis of
the last sale price or, lacking any sale, at the closing bid price, on the
primary exchange on which the security is traded. United States
over-the-counter equities are valued on the basis of the closing bid
price.
International securities traded on a national securities exchange are
valued on the basis of the last sale price. International securities
traded over the counter are valued on the basis of the mean of bid prices.
In the absence of a last sale or mean bid price, respectively, such
securities may be valued on the basis of prices provided by a pricing
service if those prices are believed to reflect the market value of such
securities.
Money market instruments maturing within 60 days of the valuation date are
valued at amortized cost, a method by which each portfolio instrument is
initially valued at cost, and thereafter a constant accretion/amortization
to maturity of any discount or premium is assumed, unless the Board of
Trustees determines that amortized cost does not represent fair value.
The Fund may value securities for which market quotations are not readily
available at "fair value," as determined in good faith pursuant to
procedures established by the Board of Trustees.
Securities transactions: Securities transactions are recorded on a trade
date basis. Realized gains and losses from securities transactions are
recorded on the basis of identified cost.
Investment income: Dividend income is recorded on the ex-dividend date and
interest income is recorded daily on the accrual basis.
Amortization and accretion: All zero-coupon bond discounts and original
issue discounts are accreted for both tax and financial reporting
purposes. All short- and long-term market premiums/discounts are
amortized/accreted for both tax and financial reporting purposes.
Annual Report 15
<PAGE>
SSgA
Aggressive Equity Fund
Notes to Financial Statements, continued
August 31, 1999
Federal income taxes: Since the Investment Company is a Massachusetts
business trust, each fund is a separate corporate taxpayer and determines
its net investment income and capital gains (or losses) and the amounts to
be distributed to each fund's shareholders without regard to the income
and capital gains (or losses) of the other funds.
It is the Fund's intention to qualify as a regulated investment company,
as defined by the Internal Revenue Code of 1986, as amended. This requires
the Fund to distribute all of its taxable income. Therefore, the Fund paid
no federal income taxes and no federal income tax provision was required.
The Fund's aggregate cost of investments and the composition of unrealized
appreciation and depreciation of investment securities for federal income
tax purposes as of August 31, 1999 are as follows:
Net Unrealized
Federal Tax Unrealized Unrealized Appreciation
Cost Appreciation (Depreciation) (Depreciation)
----------- ------------ -------------- --------------
$ 6,689,292 $ 778,021 $ (437,365) $ 340,656
Dividends and distributions to shareholders: Income dividends and capital
gain distributions, if any, are recorded on the ex-dividend date.
Dividends are generally declared and paid quarterly. Capital gain
distributions are generally declared and paid annually. An additional
distribution may be paid by the Fund to avoid imposition of federal income
tax on any remaining undistributed net investment income and capital
gains.
The timing and characterization of certain income and capital gain
distributions are determined in accordance with federal tax regulations
which may differ from generally accepted accounting principles ("GAAP").
As a result, net investment income and net realized gain (or loss) on
investment transactions for a reporting period may differ significantly
from distributions during such period. The differences between tax
regulations and GAAP relate primarily to investments in certain securities
sold at a loss. Accordingly, the Fund may periodically make
reclassifications among certain of its capital accounts without impacting
its net asset value.
Expenses: Most expenses can be directly attributed to the Fund. Expenses
which cannot be directly attributed are allocated among all funds based
principally on their relative net assets.
3. Securities Transactions
Investment transactions: For the period December 30, 1998 to August 31,
1999, purchases and sales of investment securities, excluding short-term
investments, aggregated to $17,344,804 and $12,059,509, respectively.
Securities Lending: Effective December 17, 1998, the Investment Company
started its securities lending program. The program allows each Fund to
loan securities with a value up to 33 1/3% of its total assets to certain
brokers. The Fund receives cash (U.S. currency), U.S. Government or U.S.
Government agency obligations as collateral against the loaned securities.
To the extent that a loan is secured by cash collateral, such collateral
shall be invested by State Street Bank and Trust Company in short-term
instruments, money market mutual funds, and such other short-term
investments, provided the investments meet certain quality and
diversification requirements. Under the securities lending arrangement,
the collateral received is recorded on the Fund's statement of assets and
16 Annual Report
<PAGE>
SSgA
Aggressive Equity Fund
Notes to Financial Statements, continued
August 31, 1999
liabilities along with the related obligation to return the collateral. In
those situations where the Company has relinquished control of securities
transferred, it derecognizes the securities and records a receivable from
the counterparty.
Income generated from the investment of cash collateral, less negotiated
rebate fees paid to participating brokers and transaction costs, is
divided between the Fund and State Street Bank and Trust Company and is
recorded as interest income for the Fund. To the extent that a loan is
secured by non-cash collateral, brokers pay the Fund negotiated lenders'
fees, which are divided between the Fund and State Street Bank and Trust
Company and are recorded as interest income for the Fund. All collateral
received will be in an amount at least equal to 102% (for loans of U.S.
securities) or 105% (for non-U.S. securities) of the market value of the
loaned securities at the inception of each loan. Should the borrower of
the securities fail financially, there is a risk of delay in recovery of
the securities or loss of rights in the collateral. Consequently, loans
are made only to borrowers which are deemed to be of good financial
standing. As of August 31, 1999, the value of outstanding securities on
loan and the value of collateral amounted to $1,362,713 and $1,410,084,
respectively. The Fund recorded securities lending income of $4,044 during
the year.
4. Related Parties
Adviser: The Investment Company has an investment advisory agreement with
State Street Bank and Trust Company under which the Adviser directs the
investments of the Fund in accordance with its investment objectives,
policies, and limitations. For these services, the Fund pays a fee to the
Adviser calculated daily and paid monthly, at an annual rate of .75% of
its average daily net assets. The Adviser has voluntarily agreed to
reimburse the Fund for all expenses in excess of 1.10% of average daily
net assets on an annual basis. As of August 31, 1999, the receivable due
from the Adviser for expenses in excess of the expense cap has been netted
against the Advisory fee payable. The Investment Company also has
contracts with the Adviser to provide custody, shareholder servicing and
transfer agent services to the Fund. These amounts are presented in the
accompanying Statement of Operations.
In addition, the Fund has entered into arrangements with its Adviser
whereby credits realized as a result of uninvested cash balances were used
to reduce a portion of the Fund's expenses. During the period, the Fund's
custodian fees were reduced by $94 under these arrangements.
Administrator: The Investment Company has an administration agreement with
Frank Russell Investment Management Company (the "Administrator"), a
wholly owned subsidiary of The Northwestern Mutual Life Insurance Company,
under which the Administrator supervises all non-portfolio investment
aspects of the Investment Company's operations and provides adequate
office space and all necessary office equipment and services, including
telephone service, utilities, stationery supplies, and similar items. The
Investment Company pays the Administrator the following fees for services
supplied by the Administrator pursuant to the Administration Agreement:
(i) an annual fee, payable monthly on a pro rata basis, based on the
following percentages of the combined average daily net assets of all
domestic funds: $0 up to and including $500 million - .06%; over $500
million to and including $1 billion - .05%; over $1 billion - .03%, and
(ii) less an amount equal to the sum of certain distribution-related
expenses incurred by the Investment Company's Distributor on behalf of the
Annual Report 17
<PAGE>
SSgA
Aggressive Equity Fund
Notes to Financial Statements, continued
August 31, 1999
Fund. In addition, the Fund reimburses the Administrator for out-of-pocket
expenses and start-up costs for new funds.
Distributor and Shareholder Servicing: The Investment Company has a
Distribution Agreement with Russell Fund Distributors (the "Distributor")
which is a wholly-owned subsidiary of the Administrator to promote and
offer shares of the Investment Company. The Distributor may enter into
sub-distribution agreements with other non-related parties. The amounts
paid to the Distributor are included in the accompanying Statement of
Operations.
The Investment Company has a Distribution Plan pursuant to Rule 12b-1 (the
"Plan") under the 1940 Act. Under this Plan, the Investment Company is
authorized to make payments to the Distributor, or any Shareholder
Servicing Agent, as defined in the Plan, for providing distribution and
marketing services, for furnishing assistance to investors on an ongoing
basis, and for the reimbursement of direct out-of-pocket expenses charged
by the Distributor in connection with the distribution and marketing of
shares of the Investment Company and the servicing of investor accounts.
The Fund has service agreements with the Adviser, State Street Brokerage
Services, Inc. ("SSBSI"), a wholly- owned subsidiary of the Adviser, the
Adviser's Retirement Investment Services Division ("RIS"), the Adviser's
Metropolitan Division of Commercial Banking ("Commercial Banking") and
State Street Solutions ("Solutions")(collectively the "Agents"), as well
as several unaffiliated service providers. For these services, the Fund
pays .025%, .175%, .175%, .175% and .175%, to the Adviser, SSBSI, RIS,
Commercial Banking, and Solutions, respectively, based upon the average
daily value of all Fund shares held by or for customers of these Agents.
For the period ended August 31, 1999, the Fund was charged shareholder
servicing expenses of $4 by the Adviser. The Fund did not incur any
expenses from SSBSI, RIS, Commercial Banking and Solutions during this
period.
The combined distribution and shareholder servicing payments shall not
exceed .25% of the average daily value of net assets on an annual basis.
The shareholder servicing payments shall not exceed .20% of the average
daily value of net assets on an annual basis. Any payments that exceed the
maximum amount of allowable reimbursement may be carried forward for two
years following the year in which the expenditure was incurred so long as
the plan is in effect. The Fund's responsibility for any such expenses
carried forward shall terminate at the end of two years following the year
in which the expenditure was incurred. The Trustees or a majority of the
Fund's shareholders have the right, however, to terminate the Distribution
Plan and all payments thereunder at any time. The Fund will not be
obligated to reimburse the Distributor for carryover expenses subsequent
to the Distribution Plan's termination or noncontinuance. There were no
carryover expenses as of August 31, 1999.
Affiliated Brokerage: The Fund placed a portion of its portfolio
transactions with SSBSI, an affiliated broker dealer of the Fund's
Adviser. The commissions paid to SSBSI were $12,118 for the period ended
August 31, 1999.
Board of Trustees: Through May 31, 1999, the Investment Company paid each
Trustee not affiliated with the Investment Company a retainer of $48,000
annually, $1,500 for each board meeting attended, an additional $1,500 for
attending the annual audit committee meeting, and reimbursement for
out-of-pocket expenses. As of June 1, 1999, each Trustee receives $2,500
for each board meeting attended, an additional $2,500 for attending the
18 Annual Report
<PAGE>
SSgA
Aggressive Equity Fund
Notes to Financial Statements, continued
August 31, 1999
annual audit committee meeting and $2,500 for the valuation committee fee
in addition to the $48,000 annual retainer. These expenses are allocated
among all of the Funds based upon their relative net assets.
Accrued fees payable to affiliates and trustees as of August 31, 1999 were
as follows:
Administration fees $ 227
Custodian fees 152
Distribution fees 85
Shareholder servicing fees 4
Transfer agent fees 345
Trustees' fees 27
--------
$ 840
========
Beneficial Interest: As of August 31, 1999, two shareholders (who are also
other series of the Investment Company) were record owners of
approximately 47% and 44%, respectively, of the total outstanding shares
of the Fund.
5. Fund Share Transactions (amounts in thousands)
For the Period
December 30, 1998
(Commencement of Operations)
to August 31, 1999
---------------------------
Shares Dollars
----------- -----------
Proceeds from shares sold .................... 679 $ 6,814
Proceeds from reinvestment of distributions .. -- --
Payments for shares redeemed ................. (115) (1,342)
------ ------
Total net increase (decrease) ................ 564 $ 5,472
====== =======
6. Line of Credit
The Fund and several affiliated Funds (the "Participants") share in a $50
million revolving credit facility for temporary or emergency purposes,
including the meeting of redemption requests that otherwise might require
the untimely disposition of securities. The Participants are charged an
annual commitment fee of .09% (.065% prior to July 15, 1999) on the
average daily unused amount of the aggregate commitment, which is
allocated among each of the Participants. Interest, at the Federal Fund
Rate plus .50% annually, is calculated based on the market rates at the
time of the borrowing. The Fund may borrow up to a maximum of 33 1/3
percent of the value of it's total assets under the agreement. The Fund
did not have any drawdowns during the year.
Annual Report 19
<PAGE>
SSgA Aggressive Equity Fund
One International Place, 27th Floor
Boston, Massachusetts 02110
(800) 997-7327
- --------------------------------------------------------------------------------
Trustees
Lynn L. Anderson, Chairman
William L. Marshall
Steven J. Mastrovich
Patrick J. Riley
Richard D. Shirk
Bruce D. Taber
Henry W. Todd
Officers
Lynn L. Anderson, President, Treasurer and CEO
Mark E. Swanson, Assistant Secretary, Assistant
Treasurer and Principal Accounting Officer
J. David Griswold, Vice President and Secretary
Deedra S. Walkey, Assistant Secretary
Rick J. Chase, Assistant Secretary
Carla L. Anderson, Assistant Secretary
Investment Adviser
State Street Bank and Trust Company
225 Franklin Street
Boston, Massachusetts 02110
Custodian, Transfer Agent and
Office of Shareholder Inquiries
State Street Bank and Trust Company
1776 Heritage Drive
North Quincy, Massachusetts 02171
(800) 647-7327
Distributor
Russell Fund Distributors, Inc.
One International Place, 27th Floor
Boston, Massachusetts 02110
(800) 997-7327
Administrator
Frank Russell Investment Management Company
909 A Street
Tacoma, Washington 98402
Legal Counsel
Goodwin, Procter & Hoar LLP
Exchange Place
Boston, Massachusetts 02109
Independent Accountants
PricewaterhouseCoopers LLP
160 Federal Street
Boston, Massachusetts 02110
20 Annual Report
<PAGE>
SSgA(R) Funds
IAM Shares Fund
Annual Report
August 31, 1999
Table of Contents
Page
Chairman's Letter ......................................................... 4
Portfolio Management Discussion and Analysis .............................. 6
Report of Independent Accountants ......................................... 8
Financial Statements ...................................................... 9
Financial Highlights ...................................................... 18
Notes to Financial Statements ............................................. 19
Fund Management and Service Providers ..................................... 24
"SSgA(R)" is a registered trademark of State Street Corporation and is licensed
for use by the SSgA Funds.
This report is prepared from the books and records of the Fund and it is
submitted for the general information of shareholders. This information is for
distribution to prospective investors only when preceded or accompanied by a
SSgA Funds Prospectus containing more complete information concerning the
investment objective and operations of the Fund, charges and expenses. The
Prospectus should be read carefully before an investment is made.
Performance is historical and assumes reinvestment of all dividends and capital
gains. Investment return and principal value will fluctuate so that an
investor's shares, when redeemed, may be worth more or less than when purchased.
Past performance is not indicative of future results. International markets
entail different risks than those typically associated with domestic markets,
including currency fluctuations, political and economic instability, accounting
changes and foreign taxation. Securities may be less liquid and more volatile.
Please see the Prospectus for further details. Russell Fund Distributors, Inc.,
is the distributor of the SSgA Funds.
<PAGE>
SSgA IAM Shares Fund
- --------------------------------------------------------------------------------
Letter From the Chairman of State Street Global Advisors
- --------------------------------------------------------------------------------
Dear Shareholders,
It is my pleasure to provide you with the SSgA Funds annual report for the
fiscal year ended August 31, 1999. The SSgA Fund family has grown to include
twenty-three portfolios covering a broad range of investment strategies. The
enclosed information provides an overview of the investment process for the SSgA
IAM Shares Fund. This overview contains market updates, performance, and
financial information for the Fund. I hope you will find this information a
useful reference as you review your investment strategy.
During the past fiscal year, the SSgA Fund family has opened two new Funds. The
names and investment objectives for these funds are as follows:
The SSgA Aggressive Equity Fund seeks to maximize total return through investing
in US equity securities that are undervalued relative to their growth potential
as measured by SSgA's proprietary models.
The SSgA IAM Shares Fund seeks to maximize total return by investing primarily
in equity securities of companies that have entered into collective bargaining
agreements with the International Association of Machinists and Aerospace
Workers or affiliated labor unions.
Additionally, three SSgA Funds achieved a five-year track record during the 1999
fiscal year. These funds include the two institutional money market funds, SSgA
US Treasury and SSgA Prime Money Market Funds and the SSgA Emerging Markets
Fund. We are proud of our long-term record and look forward to having additional
funds complete their five-year anniversary.
In today's complex global marketplace, we are continually researching new
products and ideas to introduce to our fund family. Here at SSgA, we are
committed to providing a wide range of competitive investment vehicles to
fulfill your investment needs.
I would like to thank you for choosing the SSgA Funds.
Sincerely,
/s/ Nicholas A. Lopardo
Nicholas A. Lopardo
State Street Global Advisors
Chairman and Chief Executive Officer
4 Annual Report
<PAGE>
SSgA IAM Shares Fund
- --------------------------------------------------------------------------------
Management of the Funds
- --------------------------------------------------------------------------------
[PHOTO]
Nicholas A. Lopardo
Chairman and Chief Executive Officer
A Team Approach to Investment Management
Our investment strategies are the product of the combined experience of our
professional staff. Portfolio Managers work together to develop and enhance the
techniques that drive our investment processes. As a result, the portfolios we
manage benefit from the knowledge of the entire team.
Mr. Michael J. Feehily, Principal, is the portfolio manager primarily
responsible for investment decisions regarding the IAM Shares Fund. Mr. Feehily
joined State Street Corporation in August 1992 in the Global Operations area
before moving to the Performance and Analytics group. He helped to develop and
work with a proprietary application, which is used to analyze venture capital,
real estate, and other private investments. There are four other portfolio
managers who assist Mr. Feehily in managing the Fund.
Annual Report 5
<PAGE>
SSgA IAM Shares Fund
- --------------------------------------------------------------------------------
Portfolio Management Discussion and Analysis
- --------------------------------------------------------------------------------
Objective: The Fund seeks to maximize total return primarily through investments
in equity securities of companies that have entered into collective bargaining
agreements with the International Association of Machinists & Aerospace Workers
(IAM) or affiliated labor unions.
Invests in: At least 65% of the total assets will be invested in equity
securities of companies that have entered into collective bargaining agreements
with the IAM as noted above.
Strategy: The Fund's investment strategy is driven by an investment process that
manages portfolio exposures to fundamental attributes within a multifactor risk
model environment. These attributes include industry allocations, size, style,
growth expectations, and valuation ratios. In addition to the 65% minimum
allocation to companies as noted above, the remainder of the Fund's assets are
open to either further investment in those companies with collective bargaining
agreements with the IAM or companies outside this universe which are
constituents of the S&P 500(R) Index.
- --------------------------------------------------------------------------------
GROWTH OF A $10,000 INVESTMENT
Dates IAM Shares Fund S&P 500(R)Index**
Inception* $10,000 $10,000
1999 $10,140 $10,230
================================================================================
Performance Review
From the Fund's inception date of June 2, 1999, through August 31, 1999, the
Fund gained 1.40%, compared to the S&P 500(R) Index return of 2.30%. The Fund's
performance is net of operating expenses, whereas Index results do not include
expenses of any kind. The underperformance of the Fund versus the Index is
attributable to the Fund's benchmark- relative underweight in the Technology
sector, which gained 16.81% for the three months ended August 31, 1999.
Additionally, the Fund's Index-relative overweights in the Consumer Staples and
Transportation sectors, which lost 3.35% and 15.11%, respectively, contributed
negatively to Fund results. However, the Fund did benefit from its underexposure
to the Financials Sector which lost 4.01% for the period.
- --------------------------------------------------------------------------------
SSgA IAM Shares Fund
- --------------------------------------------------------------------------------
Period Ended Growth of Total
08/31/99 $10,000 Return
- ------------ ----------- -----------
Inception $ 10,140 1.40%+
- --------------------------------------------------------------------------------
Standard & Poor's(R) 500
Composite Stock Price Index
- --------------------------------------------------------------------------------
Period Ended Growth of Total
08/31/99 $10,000 Return
- ------------ ----------- -----------
Inception $ 10,230 2.30%+
See related Notes on following page.
6 Annual Report
<PAGE>
SSgA IAM Shares Fund
- --------------------------------------------------------------------------------
Portfolio Management Discussion and Analysis
- --------------------------------------------------------------------------------
Market and Portfolio Highlights
During the three months since the Fund's inception, the large capitalization
segment of the US equity market, as represented by the S&P 500, posted a gain of
5.55% for the month of June, before experiencing losses of 3.12% and 0.49% for
July and August, respectively. Most of June's performance came on the heels of a
25 basis point (bp) rate hike by the Federal Reserve, as investors seemed to
breathe a sigh of relief that the increase could have been substantial. The
Federal Reserve also announced that they were returning to a neutral bias
following the rate hike, news that was also accepted favorably by the investment
community. In July, inflationary fears reared their ugly head again, sparked by
a rise in commodity prices and mounting wage pressures. Consumer spending also
declined, showing signs that the economy may be slowing. Only the Technology and
the Energy sectors posted positive returns for the month. August brought another
25bp rate increase to counter what the Fed viewed as a continuing overheated
economy. Further rises in commodity prices and wage pressures served to dampen
the market's performance in August as well.
Only three sectors (Technology, Energy, and Health Care) were able to muster
positive returns during the first three months of the Fund's existence. The Fund
was underweight relative to the S&P 500 Index in Technology and Health Care, and
overweight in Energy. In fact, the benchmark-relative underweight in the
Technology sector alone was responsible for 63 of the 79 bps of
benchmark-relative underperformance for the period. The worst performing sectors
were Transportation (the Fund was overweight), Communication Services
(underweight), and Utilities (underweight). The Fund's relative overweight to
the Transportation sector accounted for much of the remaining underperformance.
The leading contributors to the Fund's performance over the period were
Schering-Plough, which gained 17.1%, Tiffany & Company (27.4%), and General
Electric (9.8%). The biggest detractors to Fund performance (due to a
benchmark-relative underweighting) were all Technology stocks, including Intel
Corp., which gained 62.2% during the period, Dell Computer (47.7%), and Texas
Instruments (54.0%).
The SSgA IAM Shares Fund seeks to meet or exceed the total return of the S&P 500
Index. To accomplish this, the Fund utilizes an optimization approach through
mitigating some of the inherent industry bets that stem from the "union
friendly" universe.
At the end of the fiscal year, the SSgA IAM Shares Fund held 271 securities with
a market value of nearly $59 million. Of these 271 securities, there were 153
securities of companies who have collective bargaining agreements with the IAM.
These "union friendly" companies represented 72% of the Fund's market value. In
total, there are currently 342 publicly traded companies which have agreements
with the IAM and that are eligible for investment by the Fund.
- --------------------------------------------------------------------------------
Top Ten Equity Holdings
(as a percent of Total Investments) August 31, 1999
- --------------------------------------------------------------------------------
General Electric Co. 4.7%
Microsoft Corp. 3.7
Citigroup, Inc. 3.0
Merck & Co., Inc. 2.8
Procter & Gamble Co. 2.1
AT&T Corp. 2.0
Schering-Plough Corp. 2.0
Exxon Corp. 2.0
Coca-Cola Co. (The) 2.0
Intel Corp. 1.9
- --------------------------------------------------------------------------------
--------------------
Notes: The following notes relate to the Growth of $10,000 graph and table on
the preceding page.
* The Fund commenced operations on June 2, 1999. Index comparison also began
June 2, 1999.
** The Standard & Poor's(R) 500 Composite Stock Index is composed of 500
common stocks which are chosen by Standard and Poor's Corporation to best
capture the price performance of a large cross-section of the US publicly
traded stock market. The Index is structured to approximate the general
distribution of industries in the US economy.
+ Total return reflects performance for the period June 2, 1999 to August
31, 1999.
"Standard & Poor's(R)", "S&P(R)", "S&P 500(R)", "Standard & Poor's 500" and
"500" are trademarks of Standard & Poor's Corporation and have been licensed for
use by The SSgA Fund. The Product is not sponsored, endorsed, sold or promoted
by Standard & Poor's, and Standard & Poor's makes no representation regarding
the advisability of investing in the Product.
Performance is historical and assumes reinvestment of all dividends and capital
gains. Investment return and principal value will fluctuate so that an
investor's shares, when redeemed, may be worth more or less than when purchased.
Past performance is not indicative of future results.
Annual Report 7
<PAGE>
Report of Independent Accountants
To the Shareholders and Board of Trustees
of the SSgA Funds:
In our opinion, the accompanying statement of assets and liabilities and
statement of net assets, and the related statements of operations and of changes
in net assets and the financial highlights present fairly, in all material
respects, the financial position of SSgA IAM Shares Fund (the "Fund") at August
31, 1999, the results of its operations, the changes in its net assets, and the
financial highlights for the period June 2, 1999 (commencement of operations) to
August 31, 1999, in conformity with generally accepted accounting principles.
These financial statements and financial highlights (hereafter referred to as
"financial statements") are the responsibility of the Fund's management; our
responsibility is to express an opinion on these financial statements based on
our audit. We conducted our audit of these financial statements in accordance
with generally accepted auditing standards which require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audit, which included confirmation of securities at August
31, 1999 by correspondence with the custodian, provides a reasonable basis for
the opinion expressed above.
Boston, Massachusetts
October 11, 1999
/s/ PricewaterhouseCoopers LLP
8 Annual Report
<PAGE>
SSgA
IAM Shares Fund
Statement of Net Assets
August 31, 1999
Market
Number Value
of (000)
Shares %
------ -----
Common Stocks - 97.7%
Basic Industries - 4.4%
Air Products & Chemicals, Inc. 1,000 34
Alcoa, Inc. 5,300 342
Bowater, Inc. 300 16
Champion International Corp. 500 28
Dexter Corp. 500 18
Dow Chemical Co. 2,600 295
Illinois Tool Works, Inc. 3,300 257
International Paper Co. 4,900 231
Kimberly-Clark Corp. 7,500 427
Minnesota Mining & Manufacturing Co. 5,000 473
Phelps Dodge Corp. 800 45
Pitt-Des Moines, Inc. 600 15
Premark International, Inc. 500 17
Rohm & Haas Co. 36 1
Sigma Aldrich Corp. 4,700 151
Temple-Inland, Inc. 2,800 174
Union Carbide Corp. 800 46
Willamette Industries, Inc. 1,600 62
------
2,632
------
Capital Goods - 7.6%
Applied Power, Inc. Class A 1,700 52
Boston Scientific Corp. (a) 400 14
Case Corp. 1,900 94
Caterpillar, Inc. 3,200 181
Chart Industries, Inc. 200 1
Cummins Engine Co., Inc. 100 6
Dover Corp. 3,500 135
Emerson Electric Co. 3,600 225
Fisher Scientific International, Inc. (a) 8,200 148
General Electric Co. 25,400 2,853
Ingersoll-Rand Co. 3,300 210
Johnson Controls, Inc. 2,200 150
Manitowoc Co., Inc. 400 15
Martin Marietta Materials, Inc. 1,300 59
Parker-Hannifin Corp. 700 31
Raytheon Co. Class B 2,700 184
SPX Corp. (a) 500 42
Tivoli Industries, Inc. (a) 1,500 5
Tyco International, Ltd. 1,500 152
Wyman-Gordon Co. (a) 2,500 46
------
4,603
------
Consumer Basics - 19.3%
Abbott Laboratories 2,500 108
American Home Products Corp. 2,100 87
Amgen, Inc. (a) 1,300 108
Baxter International, Inc 8,000 537
Black & Decker Corp. 1,600 84
Bristol-Myers Squibb Co. 5,600 394
Campbell Soup Co. 6,900 305
Coca-Cola Co. (The) 19,600 1,172
ConAgra, Inc. 3,000 74
Costco Wholesale Corp. (a) 700 52
Dial Corp. 5,000 139
Gillette Co. 1,100 51
Great Atlantic & Pacific Tea Co., Inc. 300 11
Johnson & Johnson 3,400 348
Kroger Co. (a) 15,000 347
Lilly (Eli) & Co. 3,100 231
Medtronic, Inc. 1,000 78
Merck & Co., Inc. 25,200 1,693
New Brunswick Scientific Co., Inc. (a) 3,600 25
PepsiCo, Inc. 15,000 512
Pfizer, Inc. 13,200 498
Philip Morris Cos., Inc. 20,200 756
Procter & Gamble Co. 12,900 1,280
Ralston-Purina Group 2,500 69
Safeway, Inc. (a) 8,400 391
Sara Lee Corp. 8,900 197
Schering-Plough Corp. 23,100 1,214
Suiza Foods Corp. (a) 2,200 70
Annual Report 9
<PAGE>
SSgA
IAM Shares Fund
Statement of Net Assets, continued
August 31, 1999
Market
Number Value
of (000)
Shares %
------ -----
SYSCO Corp. 6,500 212
Unilever NV (a) 7,100 489
Warner-Lambert Co. 1,500 100
Wild Oats Markets, Inc. (a) 1,000 37
------
11,669
------
Consumer Durables - 4.1%
Best Buy Co. (a) 600 42
DaimlerChrysler AG 2,700 203
Dana Corp. 300 13
Danaher Corp. 5,000 294
Eaton Corp. 2,100 206
Ethan Allen Interiors, Inc. 3,900 114
Federal-Mogul Corp. 600 27
Ford Motor Co. 6,700 349
General Motors Corp. 6,700 443
Goodyear Tire & Rubber Co. 600 34
Harley-Davidson, Inc. 3,000 164
Lear Corp. (a) 300 12
Leggett & Platt, Inc. 2,900 64
Maytag Corp. 4,200 263
PACCAR, Inc. 1,300 71
Whirlpool Corp. 2,400 170
------
2,469
------
Consumer Non-Durables - 5.9%
99 Cents Only Stores NPV (a) 3,600 130
Anheuser-Busch Cos., Inc. 12,400 955
Brunswick Corp. 800 20
Circuit City Stores, Inc. 400 17
Dayton Hudson Corp. 1,400 81
Gap, Inc. 2,700 106
Home Depot, Inc. (The) 4,800 293
Kohl's Corp. (a) 400 29
Lowe's Cos., Inc. 200 9
Newell Rubbermaid, Inc. 4,700 193
Rite Aid Corp. 9,200 170
Seagram Co., Ltd. NPV 6,900 366
Staples, Inc. (a) 200 4
Tiffany & Co. 6,600 349
TJX Cos., Inc. 100 3
Wal-Mart Stores, Inc. 18,500 820
Walgreen Co. 1,000 23
------
3,568
------
Consumer Services - 1.9%
Alaska Air Group, Inc. (a) 800 35
Continental Airlines, Inc. Class B (a) 2,000 82
Disney (Walt) Co. 19,600 544
Marriot International, Inc. Class A 4,700 161
Southwest Airlines Co. 14,250 238
Starwood Hotels & Resorts Worldwide, Inc. 100 2
UAL Corp. (a) 100 6
USAirways Group, Inc. (a) 2,500 77
------
1,145
------
Energy - 6.7%
Anadarko Petroleum Corp. 100 3
Apache Corp. 200 9
Atlantic Richfield Co. 1,200 106
Baker Hughes, Inc. 2,200 75
BP Amoco PLC - ADR 1,900 213
Burlington Resources, Inc. 400 17
Chevron Corp. 4,700 434
Exxon Corp. 15,100 1,191
Halliburton Co. 5,600 260
Mobil Corp. 3,700 379
Royal Dutch Petroleum Co. 12,400 767
Schlumberger, Ltd. 5,500 367
Texaco, Inc. 3,000 190
Unocal Corp. 900 37
------
4,048
------
10 Annual Report
<PAGE>
SSgA
IAM Shares Fund
Statement of Net Assets, continued
August 31, 1999
Market
Number Value
of (000)
Shares %
------ -----
Finance - 10.6%
AFLAC, Inc. 800 36
Allstate Corp. 2,100 69
American Express Co. 1,700 234
American Financial Group, Inc. 500 15
American International Group, Inc. 6,250 579
Associates First Capital Corp. Class A 1,000 34
Bank of America Corp. 8,500 514
Bank of New York Co., Inc. 2,800 100
Bank One Corp. 5,400 217
BankBoston Corp. 300 14
BB&T Corp. 600 20
Capital One Financial Corp. 300 11
Chase Manhattan Corp. 4,500 377
Chubb Corp. (The) 100 6
CIGNA Corp. 500 45
Cincinnati Financial Corp. 500 20
Citigroup, Inc. 40,400 1,795
Federal Home Loan Mortgage Corp. 1,200 62
Federal National Mortgage Association 2,200 137
Fifth Third Bancorp 800 53
First Union Corp. 3,200 133
Firstar Corp. 3,700 99
Fleet Financial Group, Inc. 1,000 40
Franklin Resources, Inc. 200 7
Golden West Financial Corp. 600 54
Hartford Financial Services Group, Inc. (The) 400 18
Household International Corp. 11,400 430
Lehman Brothers Holdings, Inc. 100 5
MBIA, Inc. 200 10
MBNA Corp. 1,500 37
Mellon Bank Corp. 800 27
Mercantile Bancorp, Inc. 100 6
Merrill Lynch & Co., Inc. 1,600 119
MGIC Investment Corp. 300 13
Morgan (J.P.) & Co., Inc. 1,000 129
Morgan Stanley Dean Witter & Co. 2,800 240
National City Corp. 1,600 44
Northern Trust Corp. 500 42
Progressive Corp. 600 61
Providian Financial Corp. 400 31
Republic of New York Corp. 100 7
Schwab (Charles) Corp. 4,000 158
St. Paul Cos., Inc. 200 6
State Street Corp. 800 48
SunTrust Banks, Inc. 1,100 71
Synovus Financial Corp. 100 2
U.S. Bancorp 1,900 59
Wachovia Corp. 700 55
Washington Mutual, Inc. 2,700 87
------
6,376
------
General Business - 6.3%
Butler International, Inc. (a) 1,900 23
CBS Corp. (a) 14,100 663
Cendant Corp. (a) 273 5
Computer Sciences Corp. (a) 9,500 657
Dispatch Management Services Corp. (a) 5,400 13
Knight-Ridder, Inc. 2,100 113
Manpower, Inc. 500 14
MediaOne Group, Inc. (a) 700 46
Meredith Corp. 600 21
New York Times Co. Class A 2,600 102
Nextel Communications, Inc. Class A (a) 700 40
Nortel Networks Corp. 19,200 788
QUALCOMM, Inc. (a) 800 154
SBC Communications, Inc. 6,300 302
Time Warner, Inc. 1,300 77
Times Mirror Co. Series A 500 29
Tribune Co. 3,800 355
Annual Report 11
<PAGE>
SSgA
IAM Shares Fund
Statement of Net Assets, continued
August 31, 1999
Market
Number Value
of (000)
Shares %
------ -----
United Stationers, Inc. (a) 1,300 29
Washington Post Co. Class B 300 162
Waste Management, Inc. 9,200 201
------
3,794
------
Miscellaneous - 0.1%
Katy Industries, Inc. 3,100 37
Williams Industries, Inc. (The) (a) 1,100 4
------
41
------
Shelter - 1.3%
Armstrong World Industries, Inc. 500 24
Georgia-Pacific Group 5,400 223
Lone Star Industries, Inc. 600 21
Masco Corp. 6,600 187
Owens Corning 3,300 93
Vulcan Materials Co. 1,200 51
Weyerhaeuser Co. 2,800 158
------
757
------
Technology - 20.8%
Adobe Systems, Inc. 200 20
Allen Telecom, Inc. (a) 4,100 35
AlliedSignal, Inc. 5,600 343
America Online, Inc. (a) 5,200 475
Amphenol Corp. Class A (a) 800 37
Anacomp, Inc. (a) 1,500 25
Applied Materials, Inc. (a) 700 50
Avery Dennison Corp. 1,000 55
BMC Software, Inc. (a) 300 16
Boeing Co. 8,100 367
Cisco Systems, Inc. (a) 13,300 901
COMPAQ Computer Corp. 3,800 88
Computer Associates International, Inc. 1,800 102
Compuware Corp. (a) 600 18
Dell Computer Corp. (a) 9,800 478
EG&G, Inc. 4,600 146
EMC Corp. (a) 3,300 198
Energy Conversion Devices, Inc. (a) 4,000 56
General Dynamics Corp. 1,400 88
Hewlett-Packard Co. 3,300 348
Honeywell, Inc. 3,500 397
Intel Corp. 13,100 1,077
International Business Machines Corp. 7,500 934
Koninklijke (Royal) Philips
Electronics NV NPV (a) 3,400 350
Litton Industries, Inc. (a) 1,000 64
Lockheed Martin Corp. 1,400 52
Lucent Technologies, Inc. 11,595 743
Microsoft Corp. (a) 23,900 2,211
Motorola, Inc. 900 83
Northrop Grumman Corp. 2,400 174
Novell, Inc. (a) 100 2
Oracle Systems Corp. (a) 5,800 211
Quantum Corp.-DLT & Storage Systems (a) 13,600 249
Quantum Corp.-Hard Disk Drive 6,800 48
Rockwell International Corp. (a) 2,300 136
Sun Microsystems, Inc. (a) 2,300 183
Tellabs, Inc. (a) 600 36
Texas Instruments, Inc. 2,200 181
Textron, Inc. 1,500 121
Thomas & Betts Corp. 1,300 59
Titan Corp. (a) 21,600 220
TRW, Inc. 200 11
United Technologies Corp. 5,900 390
Xerox Corp. 15,900 758
------
12,536
------
12 Annual Report
<PAGE>
SSgA
IAM Shares Fund
Statement of Net Assets, continued
August 31, 1999
Market
Number Value
of (000)
Shares %
------ -----
Transportation - 1.4%
Airborne Freight Corp. 1,900 48
CSX Corp. 500 22
Kansas City Southern Industries, Inc. 6,200 287
Navistar International Corp. (a) 3,000 146
Norfolk Southern Corp. 2,200 58
Trans World Airlines, Inc. (a) 4,700 18
Union Pacific Corp. 6,100 296
------
875
------
Utilities - 7.3%
AES Corp. (a) 800 49
Ameritech Corp. 2,700 170
AT&T Corp. 27,300 1,229
Bell Atlantic Corp. 4,500 276
BellSouth Corp. 5,800 262
Dominion Resources, Inc. 300 14
Duke Energy Corp. 500 29
Enron Corp. 2,600 109
GTE Corp. 14,300 981
MCI WorldCom, Inc. (a) 8,600 651
Montana Power Co. 14,000 433
Peco Energy Co. 300 12
Southern Co. 1,200 32
Sprint Corp. 1,800 80
Sprint Corp. (PCS Group)(a) 1,600 95
Williams Cos. (The) 400 16
------
4,438
------
Total Common Stocks
(cost $58,964) 58,951
------
Short-Term Investments - 2.1%
AIM Short Term Investment Prime
Portfolio (b) 1,159 1,159
Federated Investors Prime Cash
Obligations Fund (b) 36 36
United States Treasury Bills
4.605% due 09/16/99 (b)(c)(d) 75 75
------
Total Short-Term Investments
(cost $1,270) 1,270
------
Total Investments - 99.8%
(identified cost $60,234) 60,221
Other Assets and Liabilities,
Net - 0.2% 95
------
Net Assets - 100.0% 60,316
======
(a) Nonincome-producing security.
(b) At cost, which approximates market.
(c) Rate noted at yield-to-maturity (Unaudited).
(d) Held as collateral in connection with futures contracts purchased by the
Fund.
Abbreviations:
ADR - American Depositary Receipt
NPV - No Par Value
NV - Nonvoting
See the accompanying notes which are an integral part of the financial
statements.
Annual Report 13
<PAGE>
SSgA
IAM Shares Fund
Statement of Net Assets, continued
August 31, 1999
Unrealized
Number Appreciation
of (Depreciation)
Contracts (000)
--------- -------------
Futures Contracts
S&P 500 Index
Futures Contracts
Expiration date 09/99 3 $ (35)
-------------
Total Unrealized Appreciation
(Depreciation) on Open
Futures Contracts Purchased $ (35)
=============
See the accompanying notes which are an integral part of the financial
statements.
14 Annual Report
<PAGE>
SSgA
IAM Shares Fund
Statement of Assets and Liabilities
Amount in thousands (except per share amount) August 31, 1999
Assets
Investments at market (identified cost $60,234) ................. $ 60,221
Receivables:
Dividends ..................................................... 89
Fund shares sold .............................................. 42
Prepaid expenses ................................................ 27
----------
Total Assets ................................................ 60,379
Liabilities
Payables:
Accrued fees to affiliates ........................ $ 33
Other accrued expenses ............................ 25
Daily variation margin on futures contracts ....... 5
---------
Total Liabilities ........................................... 63
----------
Net Assets ...................................................... $ 60,316
==========
Net Assets Consist of:
Undistributed net investment income ............................. $ 135
Accumulated net realized gain (loss) ............................ 75
Unrealized appreciation (depreciation) on:
Investments ................................................... (13)
Futures contracts ............................................. (35)
Shares of beneficial interest ................................... 6
Additional paid-in capital ...................................... 60,148
----------
Net Assets ...................................................... $ 60,316
==========
Net Asset Value, offering and redemption price per share:
($60,316,048 divided by 5,948,104 shares of $.001 par value
shares of beneficial interest outstanding) .................. $ 10.14
==========
See the accompanying notes which are an integral part of the financial
statements.
Annual Report 15
<PAGE>
SSgA
IAM Shares Fund
Statement of Operations
Amount in thousands (except per share amount) For the Period June 2, 1999
(Commencement of Operations) to August 31, 1999
Investment Income
Dividends ....................................................... $ 178
Interest ........................................................ 16
----------
Total Investment Income ....................................... 194
Expenses
Advisory fees ..................................... $ 36
Administrative fees ............................... 3
Custodian fees .................................... 10
Distribution fees ................................. 3
Transfer agent fees ............................... 4
Professional fees ................................. 13
Registration fees ................................. 23
Shareholder servicing fees ........................ 3
----------
Expenses before reductions ........................ 95
Expense reductions ................................ (3)
----------
Expenses, net ................................................. 92
----------
Net investment income ............................................. 102
----------
Net Realized and Unrealized Gain (Loss)
Net realized gain (loss) on:
Investments ....................................... 71
Futures contracts ................................. 4 75
----------
Net change in unrealized appreciation
(depreciation) on:
Investments ....................................... (13)
Futures contracts ................................. (35) (48)
---------- ----------
Net realized and unrealized gain (loss) ........................... 27
Net increase (decrease) in net assets resulting from
operations ...................................................... $ 129
==========
See the accompanying notes which are an integral part of the financial
statements.
16 Annual Report
<PAGE>
SSgA
IAM Shares Fund
Statement of Changes in Net Assets
Amounts in thousands For the Period June 2, 1999
(Commencement of Operations) to August 31, 1999
Increase (Decrease) in Net Assets
Operations
Net investment income ............................................ $ 102
Net realized gain (loss) ......................................... 75
Net change in unrealized appreciation (depreciation) ............. (48)
--------
Net increase (decrease) in net assets resulting
from operations .............................................. 129
--------
Share Transactions
Net increase (decrease) in net assets from share transactions .... 60,187
--------
Total Net Increase (Decrease) in Net Assets ........................ 60,316
Net Assets
Beginning of period .............................................. --
--------
End of period (including undistributed net investment income of
$135) .......................................................... $ 60,316
========
See the accompanying notes which are an integral part of the financial
statements.
Annual Report 17
<PAGE>
SSgA
IAM Shares Fund
Financial Highlights
The following table includes selected data for a share outstanding throughout
the period and other performance information derived from the financial
statements.
1999*
----------
Net Asset Value, Beginning of Period ............................. $ 10.00
----------
Income From Operations
Net investment income (a) ...................................... .02
Net realized and unrealized gain (loss) ........................ .12
----------
Total Income From Operations ................................. .14
----------
Net Asset Value, End of Period ................................... $ 10.14
==========
Total Return (%)(b) .............................................. 1.40
Ratios/Supplemental Data:
Net Assets, end of period ($ in thousands) ..................... 60,316
Ratios to average net assets (%)(c):
Operating expenses, net (d) .................................. .65
Operating expenses, gross (d) ................................ .67
Net investment income ........................................ .72
Portfolio turnover rate (%)(e) ................................. --
* For the period June 2, 1999 (commencement of operations) to August 31,
1999.
(a) Average month-end shares were used for this calculation.
(b) Periods less than one year are not annualized. (c) The ratios for the
period ended August 31, 1999 are annualized.
(d) See Note 4 for current period amounts.
(e) This rate is not meaningful due to the Fund's short period of operation.
18 Annual Report
<PAGE>
SSgA
IAM Shares Fund
Notes to Financial Statements
August 31, 1999
1. Organization
The SSgA Funds (the "Investment Company") is a series mutual fund,
currently comprised of 23 investment portfolios which are in operation as
of August 31, 1999. These financial statements report on one portfolio,
the SSgA IAM Shares Fund (the "Fund"). The Fund invests primarily in
equity securities of companies that have entered into collective
bargaining agreements with the International Association of Machinists and
Aerospace Workers or affiliated labor unions ("IAM companies"). The
Investment Company is a registered and diversified open-end investment
company, as defined in the Investment Company Act of 1940, as amended (the
"1940 Act"), that was organized as a Massachusetts business trust on
October 3, 1987 and operates under a First Amended and Restated Master
Trust Agreement, dated October 13, 1993, as amended (the "Agreement"). The
Investment Company's Agreement permits the Board of Trustees to issue an
unlimited number of full and fractional shares of beneficial interest at a
$.001 par value.
2. Significant Accounting Policies
The Fund's financial statements are prepared in accordance with generally
accepted accounting principles which require the use of management
estimates. The following is a summary of the significant accounting
policies followed by the Fund in the preparation of its financial
statements.
Security valuation: United States equity securities listed and traded
principally on any national securities exchange are valued on the basis of
the last sale price or, lacking any sale, at the closing bid price, on the
primary exchange on which the security is traded. United States
over-the-counter equities are valued on the basis of the closing bid
price.
International securities traded on a national securities exchange are
valued on the basis of the last sale price. International securities
traded over the counter are valued on the basis of the mean of bid prices.
In the absence of a last sale or mean bid price, respectively, such
securities may be valued on the basis of prices provided by a pricing
service if those prices are believed to reflect the market value of such
securities.
Money market instruments maturing within 60 days of the valuation date are
valued at amortized cost, a method by which each portfolio instrument is
initially valued at cost, and thereafter a constant accretion/amortization
to maturity of any discount or premium is assumed, unless the Board of
Trustees determines that amortized cost does not represent fair value.
The Fund may value securities for which market quotations are not readily
available at "fair value," as determined in good faith pursuant to
procedures established by the Board of Trustees.
Securities transactions: Securities transactions are recorded on a trade
date basis. Realized gains and losses from securities transactions are
recorded on the basis of identified cost.
Investment income: Dividend income is recorded on the ex-dividend date and
interest income is recorded on the accrual basis.
Annual Report 19
<PAGE>
SSgA
IAM Shares Fund
Notes to Financial Statements, continued
August 31, 1999
Amortization and accretion: All zero-coupon bond discounts and original
issue discounts are accreted for both tax and financial reporting
purposes. All short- and long-term market premiums/discounts are
amortized/accreted for both tax and financial reporting purposes.
Federal income taxes: Since the Investment Company is a Massachusetts
business trust, each fund is a separate corporate taxpayer and determines
its net investment income and capital gains (or losses) and the amounts to
be distributed to each fund's shareholders without regard to the income
and capital gains (or losses) of the other funds.
It is the Fund's intention to qualify as a regulated investment company,
as defined by the Internal Revenue Code of 1986, as amended. This requires
the Fund to distribute all of its taxable income. Therefore, the Fund paid
no federal income taxes and no federal income tax provision was required.
The Fund's aggregate cost of investments and the composition of unrealized
appreciation and depreciation of investment securities for federal income
tax purposes as of August 31, 1999 are as follows:
Net
Unrealized
Federal Tax Unrealized Unrealized Appreciation
Cost Appreciation (Depreciation) (Depreciation)
-------------- -------------- -------------- --------------
$ 60,233,815 $ 3,269,991 $ (3,282,654) $ (12,663)
Dividends and distributions to shareholders: Income dividends and capital
gain distributions, if any, are recorded on the ex-dividend date.
Dividends are generally declared and paid quarterly. Capital gain
distributions are generally declared and paid annually. An additional
distribution may be paid by the Fund to avoid imposition of federal income
tax on any remaining undistributed net investment income and capital
gains.
The timing and characterization of certain income and capital gain
distributions are determined in accordance with federal tax regulations
which may differ from generally accepted accounting principles ("GAAP").
As a result, net investment income and net realized gain (or loss) on
investment transactions for a reporting period may differ significantly
from distributions during such period. The differences between tax
regulations and GAAP relate primarily to certain securities sold at a
loss. Accordingly, the Fund may periodically make reclassifications among
certain of its capital accounts without impacting its net asset value.
Expenses: Most expenses can be directly attributed to the Fund. Expenses
which cannot be directly attributed are allocated among all funds based
principally on their relative net assets.
Futures: The Fund is currently utilizing exchange-traded futures
contracts. The primary risks associated with the use of futures contracts
are an imperfect correlation between the change in market value of the
securities held by the Fund and the prices of futures contracts and the
possibility of an illiquid market. Changes in initial settlement value are
accounted for as unrealized appreciation (depreciation) until the
contracts are terminated, at which time realized gains and losses are
recognized.
3. Securities Transactions
Investment transactions: For the period ended August 31, 1999, purchases
and sales of investment securities, excluding short-term investments and
futures contracts, aggregated to $80,822,069 and $21,929,760,
respectively.
20 Annual Report
<PAGE>
SSgA
IAM Shares Fund
Notes to Financial Statements, continued
August 31, 1999
Futures transactions: The Fund's transactions in futures contracts for the
year ended August 31, 1999 were as follows:
Futures Contracts
--------------------------------
Aggregate
Number of Face Value of
Contracts Contracts (1)
------------- -------------
Outstanding at June 2, 1999 -- $ --
Contracts opened 5 1,689,439
Contracts closed (2) (664,510)
------------- -------------
Outstanding at August 31, 1999 3 $ 1,024,929
============= =============
(1) The aggregate face value of contracts is computed on the date each
contract was opened.
4. Related Parties
Adviser: The Investment Company has an investment advisory agreement with
State Street Bank and Trust Company under which the Adviser directs the
investments of the Fund in accordance with its investment objectives,
policies, and limitations. For these services, the Fund pays a fee to the
Adviser calculated daily and paid monthly, at an annual rate of .25% of
its average daily net assets. The Adviser voluntarily agreed to reimburse
the Fund for all expenses in excess of .65% of average daily net assets on
an annual basis. As of August 31, 1999, the receivable due from the
Adviser for expenses in excess of the expense cap has been netted against
the Advisory fee payable. The Investment Company also has contracts with
the Adviser to provide custody, shareholder servicing and transfer agent
services to the Fund. These amounts are presented in the accompanying
Statement of Operations.
In addition, the Fund has entered into arrangements with its Adviser
whereby credits realized as a result of uninvested cash balances were used
to reduce a portion of the Fund's expenses. During the year, the Fund's
custodian fees were reduced by $544 under these arrangements.
Administrator: The Investment Company has an administration agreement with
Frank Russell Investment Management Company (the "Administrator"), a
wholly owned subsidiary of The Northwestern Mutual Life Insurance Company,
under which the Administrator supervises all non-portfolio investment
aspects of the Investment Company's operations and provides adequate
office space and all necessary office equipment and services, including
telephone service, utilities, stationery supplies, and similar items. The
Investment Company pays the Administrator the following fees for services
supplied by the Administrator pursuant to the Administration Agreement:
(i) an annual fee, payable monthly on a pro rata basis, based on the
following percentages of the combined average daily net assets of all
domestic funds: $0 up to and including $500 million - .06%; over $500
million to and including $1 billion - .05%; over $1 billion - .03%, and
(ii) less an amount equal to the sum of certain distribution-related
expenses incurred by the Investment Company's Distributor on behalf of the
Fund. In addition, the Fund reimburses the Administrator for out-of-pocket
expenses and start-up costs for new funds.
Annual Report 21
<PAGE>
SSgA
IAM Shares Fund
Notes to Financial Statements, continued
August 31, 1999
Distributor and Shareholder Servicing: The Investment Company has a
Distribution Agreement with Russell Fund Distributors (the "Distributor")
which is a wholly-owned subsidiary of the Administrator to promote and
offer shares of the Investment Company. The Distributor may enter into
sub-distribution agreements with other non-related parties. The amounts
paid to the Distributor are included in the accompanying Statement of
Operations.
The Investment Company has a Distribution Plan pursuant to Rule 12b-1 (the
"Plan") under the 1940 Act. Under this Plan, the Investment Company is
authorized to make payments to the Distributor, or any Shareholder
Servicing Agent, as defined in the Plan, for providing distribution and
marketing services, for furnishing assistance to investors on an ongoing
basis, and for the reimbursement of direct out-of-pocket expenses charged
by the Distributor in connection with the distribution and marketing of
shares of the Investment Company and the servicing of investor accounts.
The Fund has service agreements with the Adviser, State Street Brokerage
Services, Inc. ("SSBSI"), a wholly- owned subsidiary of the Adviser, the
Adviser's Retirement Investment Services Division ("RIS"), the Adviser's
Metropolitan Division of Commercial Banking ("Commercial Banking") and
State Street Solutions ("Solutions")(collectively the "Agents"), as well
as several unaffiliated service providers. For these services, the Fund
pays .025%, .175%, .175%, .175% and .175% to the Adviser, SSBSI, RIS,
Commercial Banking, and Solutions, respectively, based upon the average
daily value of all Fund shares held by or for customers of these Agents.
For the period ended August 31, 1999, the Fund was charged shareholder
servicing expenses of $3,598 by the Adviser. The Fund did not incur any
expenses from SSBSI, RIS, Commercial Banking, and Solutions during this
period.
The combined distribution and shareholder servicing payments shall not
exceed .25% of the average daily value of net assets on an annual basis.
The shareholder servicing payments shall not exceed .20% of the average
daily value of net assets on an annual basis. Any payments that exceed the
maximum amount of allowable reimbursement may be carried forward for two
years following the year in which the expenditure was incurred so long as
the plan is in effect. The Fund's responsibility for any such expenses
carried forward shall terminate at the end of two years following the year
in which the expenditure was incurred. The Trustees or a majority of the
Fund's shareholders have the right, however, to terminate the Distribution
Plan and all payments thereunder at any time. The Fund will not be
obligated to reimburse the Distributor for carryover expenses subsequent
to the Distribution Plan's termination or noncontinuance. There were no
carryover expenses as of August 31, 1999.
Affiliated Brokerage: The Fund placed a portion of its portfolio
transactions with SSBSI, an affiliated broker dealer of the Fund's
Adviser. The commissions paid to SSBSI were $28,756 for the period ended
August 31, 1999.
Board of Trustees: Through May 31, 1999, the Investment Company paid each
Trustee not affiliated with the Investment Company a retainer of $48,000
annually, $1,500 for each board meeting attended, an additional $1,500 for
attending the annual audit committee meeting, and reimbursement for
out-of-pocket expenses. As of June 1, 1999, each Trustee receives $2,500
for each board meeting attended, an additional $2,500 for attending the
annual audit committee meeting and $2,500 for the valuation committee fee
in addition to the $48,000 annual retainer. These expenses are allocated
among all of the Funds based upon their relative net assets.
22 Annual Report
<PAGE>
SSgA
IAM Shares Fund
Notes to Financial Statements, continued
August 31, 1999
Accrued fees payable to affiliates and trustees as of August 31, 1999 were
as follows:
Advisory fees $ 23,677
Administration fees 306
Custodian fees 4,100
Distribution fees 447
Shareholder servicing fees 588
Transfer agent fees 3,901
Trustees' fees 214
----------
$ 33,233
==========
Beneficial Interest: As of August 31, 1999, two shareholders were record
owners of approximately 84% and 16%, respectively, of the total
outstanding shares of the Fund.
5. Fund Share Transactions (amounts in thousands)
For the Period June 2, 1999
(Commencement of Operations)
to August 31, 1999
--------------------------
Shares Dollars
------------ -----------
Proceeds from shares sold .................. 5,952 $ 60,232
Proceeds from reinvestment of
distributions ............................ -- --
Payments for shares redeemed ............... (4) (45)
------------ -----------
Total net increase (decrease) .............. 5,948 $ 60,187
============ ===========
6. Dividend
On September 1, 1999, the Board of Trustees declared a dividend of $.0171
from net investment income, payable on September 7, 1999 to shareholders
of record on September 2, 1999.
Annual Report 23
<PAGE>
SSgA IAM Shares Fund
One International Place, 27th Floor
Boston, Massachusetts 02110
(800) 997-7327
- --------------------------------------------------------------------------------
Trustees
Lynn L. Anderson, Chairman
William L. Marshall
Steven J. Mastrovich
Patrick J. Riley
Richard D. Shirk
Bruce D. Taber
Henry W. Todd
Officers
Lynn L. Anderson, President, Treasurer and CEO
Mark E. Swanson, Assistant Secretary, Assistant
Treasurer and Principal Accounting Officer
J. David Griswold, Vice President and Secretary
Deedra S. Walkey, Assistant Secretary
Rick J. Chase, Assistant Secretary
Carla L. Anderson, Assistant Secretary
Investment Adviser
State Street Bank and Trust Company
225 Franklin Street
Boston, Massachusetts 02110
Custodian, Transfer Agent and
Office of Shareholder Inquiries
State Street Bank and Trust Company
1776 Heritage Drive
North Quincy, Massachusetts 02171
(800) 647-7327
Distributor
Russell Fund Distributors, Inc.
One International Place, 27th Floor
Boston, Massachusetts 02110
(800) 997-7327
Administrator
Frank Russell Investment Management Company
909 A Street
Tacoma, Washington 98402
Legal Counsel
Goodwin, Procter & Hoar LLP
Exchange Place
Boston, Massachusetts 02109
Independent Accountants
PricewaterhouseCoopers LLP
160 Federal Street
Boston, Massachusetts 02110
24 Annual Report
